GitLab CFO on Remote Culture Success, AI Integration

Brian Robbins is the CFO of GitLab, a DevSecOps (development, security, and operations) platform that supports software innovation. In this podcast, he joins Motley Fool CEO Tom Gardner and Chief Investment Officer Andy Cross, as well as Fool AI engineer Karl Thiel, for a conversation about:

• How GitLab scaled for remote culture.
• How technology and AI have shifted over the years.
• GitLab's plan to handle the evolving cloud and DevOps landscape.

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A full transcript is below.

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Tom Gardner: Brian, thank you so much for spending the next hour with us. I feel like what I'm about to do is unfair, but I expect that to happen throughout this entire hour. Here we go. That's just the way we roll. I'm going to screen share. Brian's LinkedIn page. Brian, can we go on a little quick walking tour of your career and what led you here to GitLab?

Brian Robbins: Absolutely. Thanks, Tom, and for the others for having GitLab on today. Appreciate you having us on the show today. Before I get into my bio, it would be helpful just to let the viewers know what GitLab does.

Tom Gardner: Yes, please.

Brian Robbins: Absolutely. GitLab is the most comprehensive, intelligent DevSecOps platform for software innovation. We help developers be more productive, improve operational efficiency. We reduce their security and compliance risk, and we help them with the accelerate their digital transformation. We have approximately 50 million users on our platform, and we are one of the leading DevSecOps platforms out in the market today.

Tom Gardner: Can you just explain what DevSecOps is to somebody who doesn't understand that term?

Brian Robbins: Absolutely. When people manage to deploy secure software, there's a number of different personas that touch. Typically, if you go back 1 years ago, developers would work on it, then the developers would actually toss it over to the security professionals. They'd come back with a security vulnerabilities. I'd go to operations for QA and testing, and so forth. GitLab enables everybody to work on it with a system of record in a single pane of glass. You can see exactly what's happening. There's no one that has to play air traffic control. Analogy that I'll use is I've written several S1s, taken a couple of companies public, and I used to spend the majority of my time being an air traffic controller. Who has this section, who has that section? When was it last updated, and so forth? When I wrote the S1 for GitLab with a team, we used Google Docs. Everybody knew all the moves, ad, changes, and deletes as a document was being put together, and everybody could work on it in real time. GitLab increases cycle time for software development by 7X.

Tom Gardner: Thank you very much for that. We'll just go quickly through this. Talk to us about your time. We can just go to Brighton Park Capital Forward and how it led you to GitLab. Then obviously, you have your board seat on id.me. Love to hear just a little bit about. But then the whole hour is going to be GitLab. This is our Brian Robbins moment.

Brian Robbins: Appreciate, Tom. I've been a software CFO that have gone into several software companies and prepared them to go public. A number of them have actually been bought. With that, I've been asked to be an advisor for different VC funds and private equity funds. I'm an advisor at Brighton Park Capital. They have over $1 billion under management, and I help advise them on some of their software investments. I came to GitLab just because GitLab was the largest all-remote company pre-pandemic, and one of the most public companies out there. We have a handbook with a lot of what we have published out in the market. You can go on our handbook and search a lot about the company. We're a very transparent company that's out there. I recently joined a board called id.me. Id.me is located over by where you guys are located at. So happy to go into any further details about any of that.

Tom Gardner: That's great. Maybe I'll turn it over to Andy and Karl for the next questions, and then I'll jump in after.

Karl Thiel: I can ask first. How is it scaled for the remote culture? You joined. It was already the biggest all-remote company. Has it been fine? Has it been bumps through the process since you've joined?

Brian Robbins: It's been a great experience. I was at a software conference one time, and this is during the height of the pandemic, and people were asking, hey, should we be all remote or should we be in office? At that point, it really dawned on me. Most people spend most of their time deciding on the strategy of how they want to be versus change management. But when GitLab was founded from the start, it intended to be an all-remote company, and everything was documented in the handbook. Whether you start as a CFO or whether you start as a BDR in sales, you all go through the same onboarding process, and everybody, it's a self-led process where you go through videos, quizzes, you read papers, you learn about the culture of the company. You actually go on and learn how to use GitLab and do merge request. Since they were very deliberate about being all remote and everything was outlined, everybody had the same foundation and expectations when they joined the company. Being the CFO and hiring a number of new people to be on the team if we were just based in San Francisco or New York or London, for example the amount of people that you could hire would be on that geography, how far they live away from the office, what their commute would be like. Being an all-remote company enables you really hire team members from anywhere. We're located in over 65 countries today. We have over 2,000 employees, and it's made it really helpful to go through that process, and really have obviously the world is your talent pool.

Andy Cross: Brian, can you talk a little bit about just how the technology has shifted over the years since GitLab has been around, the AI impact, just in general, and you gave a great analogy about Google Docs. I'm just wondering if you could do something similar to how development has changed, maybe over the last few years, and how GitLab has helped in that regard.

Brian Robbins: GitLab as a whole has helped developers, security, and operations professionals become more efficient. The Forest or Wave study, one of the sites that we did. If you buy GitLab Ultimate, the payback period on that is less than six months, and ROI is over 480% in three years. GitLab's mission has always been able to help people go through the software development life cycle and do that more efficiently. We have constantly looked at ways of doing that. We continually iterate on our software to allow releases come out to our customers that they can use to get the benefits of what we do. Over the last two or three years, we spent hundreds of millions of dollars in R&D, putting that into the platform, allowing our developers to get more feature functionality for that software development life cycle. AI is just another way of doing. We approach AI a little bit differently than other people. Our Duo enterprise, Duo is our series of AI products, if you will, basically injects AI throughout the entire software development life cycle instead of just around code suggestions and code development. We looked at the entire problem set and came up with ways to actually help allow AI with the process to enable our customers to do that more efficiently.

Tom Gardner: I want to talk a little bit more specifically about the technical side with you, and Karl jumping in some of those questions. But first, just your broad philosophical view at GitLab or Brian Robbins' view of employment going forward, and what AI means. Obviously, remote work is a different work format. The Motley Fool has offices, but we allow all of our Foolish employees and contractors to select where they would like to work, and that has opened up the opportunity for us to recruit talent around the world. A number of our leading AI practitioners at the Motley Fool are on contract around the world. We were able to find them in ways that it wouldn't have been possible if we were forcing everyone into a single zip code. We could never have brought this talent together. But as we see that happening, we see a lot more interaction between full timers and contractors, for example, or short contract advisors that have a specialized skill and come in over an eight week period and help to level us up in ways that we wouldn't have been able to do in a formal workplace structure. Then, of course, now cogeneration, automation, and the potential that we could have an employment apocalypse. Do you subscribe to that, or what do you think? I don't know if you have children or if you're ever teaching a class in college, what you would tell college seniors or college freshmen about what employment will look like for them over the next 10-plus years.

Brian Robbins: I do have two boys. One graduated college, one's in college today. Obviously advice that you give your children is different than advice maybe in the work world itself. Tom, it seems like your firm is very similar to our firm in the sense that we can employ people from literally all over the world and basically assemble the best talent pool to conquer the opportunities that we have in front of us today. There's a lot of similarities there. I think it's important today for people getting into the workforce and people looking at how that's going to change. To be technical in nature, there's a lot of advancements in AI. I think data science is a necessary requirement for a lot of fields that people go into, especially in the tech world. I think we're very similar to your beliefs as it relates to remote work and the ability to recruit from all over the world.

Tom Gardner: We'll go to the technical side now. Then we're going to bring up your financial statements later and ask you a few questions about them so we can learn directly from you. I'm curious just more specifically, and then turn it to Karl about the integrations with AI tooling and GitLab's integrations, and what competitive challenges you face with the relationship between GitHub and Microsoft. Floipers can't easily use Cursor or Windsurf with GitLab. What do you see as the future of GitLab's position in the market? I would say, certainly, given the substantial competitive advantage that Microsoft and GitHub have together.

Brian Robbins: It's a great question. Two different things, let me answer. Cursor and Windsurf, and then, Microsoft and GitHub. There was a lot of questions on the earnings call related to some of the press that Cursor Windsurf and some of the M&A activity in that field has generated. We pick up where they leave off. Cursor Windsurf is really into the code suggestions and code generations. But once you actually develop and it's located primarily in the IDE, once you actually develop that, then you need to have a system to plan, manage, deploy, secure package the rest of the software development life cycle. The more code that is created, I'm a firm believer we'll create more complexity, and the more complexity is you need an integrated platform that has a single pane of glass to look over the entire software development life cycle. I think the platforms today are well-positioned with all the code that's going to get created. There has been a lot of questions around developer C count and what would impact C count over time, especially as it's related to the AI that's coming out. A simple equation to me is you have developers times productivity equals to output.

One of two things will happen. If productivity goes way up, and you assume output is going to stay constant, then developer C count will go down. If developers stay constant and productivity goes way up, you can bank on a lot of output increasing. Every company today has to become a software company, regardless of what vertical you're in. If you're in transportation, manufacturing federal sector, whatever sector you're in, software is a differentiator of giving customers more data where your package is at, when it'll be arrived, how many stops your delivery drivers away. They're shopping more. They're more informed. I'm a big believer that the developer C count will remain relatively the same. Output will increase. But also with AI, you can actually reach different personas. There will be many more people doing developer-like functions with AI out there today.

Karl Thiel: I'll follow up on that just because I'm a developer here at The Motley Fool. Just for all the viewers, so there's these development tools, Cursor and Windsurf, where developers are using AI models to code a lot faster, get their throughput up a lot, as Brian is saying. I just wonder, so I'm on that first half where we're working on the IDE before deployment, and then maybe making changes after deployment, and fixing things in production. But with so much time spent in the IDE, and you're saying GitLab helps a lot afterwards for all that work that comes after, do you not see that as a gap, perhaps, where maybe it would be great if there wasn't an easy integration or access for AI coding models with Cursor, Windsurf or other tools just to allow easier access to that code for developers in that first section?

Brian Robbins: Absolutely, and thanks for the question, Karl. If you think about the GitLab Platform, all the code suggestion tools set on top of that. GitLab is an open-source tool. People can do co-creation in GitLab. A lot of our customers they will write merge requests, software enhancements to the platform, which all customers get the benefit. We have something called Cod Digestions today. It's built into our dual product. We just announced before earnings that you will be included in all premium and ultimate subscriptions, that you will get the ability to have that as part of your base plan to do that. Whether you use Copilot, Cursor, or Windsurf GitLab duo code suggestions, all that sits on top of GitLab and can be used in correlation with GitLab. It's not a replacement. It's the combination thereof. We've been trying to think of different analogies to explain this to investors and folks at ask. One of the analogies that our CEO used during the earnings call was the difference between Excel and Snowflake. Excel, people are in the model. They're using the data, they're manipulating the data, but they use Snowflake more for the data warehouse for broad, or data science. still relatively the same data, but used for different purposes.

Karl Thiel: Got you nice. I wonder if you can say if there's any differentiators between your AI coding product duo and something like GitHub Copilot, and Cursor and Windsurf, and all these other AI coding copilots.

Brian Robbins: They're all based on their underlying LLMs. One of the things that we have relative to our AI and code suggestions in general is we have the context of what you're doing within GitLab, and so we understand what's going on within your code, what corrections you're making, what security vulnerabilities you had, and so the more context, the knowledge graph that you have better the suggestions are going to be. You'll still need a human to review it, you need to go through and look at quality, and security, and so forth, and so we're building knowledge graph to go around our AI products that will give more context, which is a differentiator to some of the other products out on the market today.

Karl Thiel: I'm very bullish on knowledge graphs, so you're pushing the right buttons here, so I'm happy about that.

Brian Robbins: Thanks, Tom.

Karl Thiel: I also saw that Duo had a partnership with Amazon Q, or AWS Q, which is AWS's platform and coding copilot system. I don't know if you want to talk about that for a second.

Brian Robbins: Absolutely. April of this year, we announced general availability of GitLab Duo with Amazon Q, and so the integrated offerings available as a bundle for GitLab Ultimate, self-managed customers on AWS, and really what we're doing is we're bundling Amazon Q software development agencies directly into the GitLab DevSecOps platform, and so it's basically, once again, bring in the best of what we have, the best of what Amazon has, putting it together, and jointly selling it to AWS customers and our customers. Some of the things that this partnership will do is help tackle some of the critical development challenges such as autonomous feature development, legacy code-based modernization, security vulnerability remediation, quality assurance improvement, and other things, and so we're super happy about the partnership. This was announced on the mainstage live. Amazon typically doesn't partner with a lot of companies in co-creation, and really think this will bring a lot of benefit to Amazon and GitLab customers.

Karl Thiel: Brian, you mentioned that DevSecOps tries to solve overall in software development, can you talk a little bit about more recently, what are some of the challenges, some of the big problems that your customers, your key clients are asking you for and what you're trying to solve, some of those really meaty problems you're trying to solve right now?

Brian Robbins: It's interesting. I think there's a number of meaty problems. I think security is always top of most of the people's agendas, if you will. This past quarter, our Ultimate product made up approximately two thirds of the overall mix of what we sold. Ultimate is our highest priced product, and it really has advanced security and compliance features that our customers love about the product, and so that's one. I think companies today, we're in a very dynamic environment, obviously and companies want to basically take the best to breed toll chains that they have that they're constantly trying to integrate together to increase the software velocity. You can do that in the GitLab platform, and so a lot of people come to us where they're eliminating a lot of these point solutions to get onto the platform to increase cycle time and to do software development better, faster, cheaper, and more secure.

Karl Thiel: Well, it's time for another game here. I'm going to do another screen share, and in this case, you will see that I have prompted this question on GPT, if you were CEO of GitLab and you wanted to 5X the value of the company over the next seven years, what exactly would you do in layman's terms and in less than 300 words? I'm going to read each of these quickly, and then, Brian, you can pick and choose any ones that you like or dislike. Share how accurate you think it is, and how much we just learned from this, or whether it was a waste of time. If I were the CEO of GitLab and wanted to 5X the company's value in seven years here's exactly what I do in plain English. Go all in on AI for developers. Make GitLab the default place where AI helps you write, test, review, and deploy code faster and safer, not just an add on, but built deeply into the product. Think copilot for the whole DevOps process. Number 2, build native support for tools like Cursor and Windsurf. Partner op or pay to integrate GitLab into all the new AI dev tools. GitLab can't have a monopoly here. We need to be where tomorrow's coders are working. Number 3, win enterprise trust with private AI. Sell GitLab as the safe place to use AI inside companies. Make it easy for CIOs to say yes to GitLab because their data-coded models stay private, and secure. Number 4, make money from the free tier. Millions use GitLab for free already, convert more of them with irresistible AI tools, usage-based pricing, and easier onboarding for teams, and finally, be the Switzerland of software development. Position GitLab as the open, neutral alternative to Microsoft. We're not pushing Azure. We're helping teams ship better software no matter what Cloud AI model or stack they use. In short, focus everything on AI powered software creation, turn the GitLab platform into an indispensable tool for modern teams, and stop letting GitLab eat our lunch. Oh, I wasn't expecting the last line there. Anything that you'd like to reflect on there. It's a particularly nasty last line by GPT, in partnership with Microsoft, I say jokingly. Which of these five stand out to you as persuasive?

Brian Robbins: Well, thanks, Tom. I appreciate the games that you're playing. It's a very good list. It's interesting, the list is really very similar to our Top 3 objectives this year as a company that we've outlined on our previous earning scales. Number 1 is focus on first orders. We know when someone lands on GitLab, the benefit in ROI will be very high, and that they'll continue to expand and grow in GitLab over a period of time. Cohorts from 10 years ago are expanding roughly at the same rate as cohorts are expanding today, and we have a very high gross retention rate. That's Number 1. Number 2 is you give more value to our customers, and that is going from premium to ultimate and building, basically a product that enables them to realize the value of security and compliance. Three is investments in AI. If you look at the lists that you've come up with, they're very similar to our objectives that we talk about externally as well as internally that we go through every week. I think five is really important, being the Switzerland of software development. GitLab, is a public company that isn't aligned with one hyperscalar, is a diverse revenue stream, one customer doesn't make up more than 2% of overall revenue, and we are developing for what's best for the DevSecOps market, and we don't have other products that we're bundling together and selling a whole host of products together, and so we are the Switzerland of software development, which I think is really important, as well. Obviously, monetizing the free tier, we have a bunch of people on our free tier. We have the wider community of developers, which we think is very important, from a contribution standpoint, from a brand standpoint, getting into education early, we have a number of people in colleges and universities using the products, so I think the list is spot on, and it aligns with the objectives within the company. I appreciate the game that you played.

Karl Thiel: It's not the only one we'll play, and thanks for playing along, Brian. We'll go back to Andy, who has to exit in a few minutes. Andy, the next two questions are yours.

Andy Cross: Taking it back to the free side of GitLab, I'm just curious if you can give some insights into your go to market strategy, the differentiating how you're thinking about selling, reaching more clients, just educate us a little bit more about what GitLab is doing from a uniqueness perspective on the selling side.

Brian Robbins: Absolutely. We had a new CRO just join us this last quarter, Ian Stewart. he's really focused on obviously the go to market motions. There's a number of ways for GitLab to grow. Obviously, selling to new clients, expanding with our existing clients. We have a number of new skews that our clients can actually buy, such as Duo Pro, Duo Enterprise. This winter, we have a Gentic workflow coming out, which would be the duo agents. We also have dedicated, which is a single tenant SaaS that you can buy. if you don't want to be in the public Cloud. Most of ours run in the Cloud today. We have a partnership program, a channel program, we sell through hyperscalar, we can expand geos, and so the estimated TAM of the market today, and this is before all the AI and the adjacent TAMS that you may get into, is about $40 billion, and it's growing at a relatively healthy clip. Once you add new personas in there with AI and other things that we talked about earlier, the market's only going to get bigger, and so I think we are well positioned as a company, with our current product set, being a Switzerland, that we talked about a little bit earlier from a DevSecOps perspective, to go out and execute in that market.

Andy Cross: Right, I know you serve a lot of the Fortune 100, some of the largest clients. Just talk a little bit about the balance between serving large clients, what large clients are you serving, what industries are you focusing the most on, all the way down to some of the smaller clients?

Brian Robbins: Absolutely. If you look at the Fortune 100, about 50% of them, about half of them use a GitLab product today. That could be in a division department, it's usually a bottoms up adoption, so it could be anywhere in that enterprise today.

Andy Cross: Brian Sorry, is that not through the CIO's office? Is that through a different process that you go through?

Brian Robbins: There's two primary, two selling motions that I can talk about. One is a bottoms up adoption. The reason why our net dollar retention rate for cohorts 10 years ago is about the same as cohorts a couple years ago is because we're expanding within those clients by selling the different seats. We're doing tier upgrades, and then also increased customer yield, and so one motion is the bottoms up motion where a engineer within a division department will buy just for that division department. Typically, that will be on a credit card. It's a relatively small purchase. Then it will go from that department, to the next department, to the next department. Then it will change personas. It will go from an engineer to an operations person, and then a lot of people will use it from an operations perspective. Eventually, when it gets to the security department, they'll look at what we have in premium versus what we have in ultimate. In ultimate, we got vulnerability assessment, FaaS testing, container scanning, a number of different things, and they'll want to upgrade to ultimate to get the advanced security features, and so then we'll have an upsell in that department. That's our bottoms up motion. We do have top down motions, which typically go through the CIO office that you alluded to. We talked about UBS, UBS had a wall to wall implementation. Their CIO put out a press release on purchasing GitLab and all the things that we're doing with them, and that's where they do an implementation across the entire enterprise, and so we have both sell in motions, bottoms up and top down.

Karl Thiel: We will now go to the financial statements. I think we will lose Andy. Thank you so much for spending some time here, Andy with us, and what we'd like to do, Brian, it's our opportunity to learn about how you see the company, to learn about GitLab, and then also to learn about how to read financial statements in a way for many of our members. We have a good continuum of investors at the Motley Fool. Some of them are retired CFOs of public companies, others just made their first investment three days ago, so we try to reach all of them in different ways here on Fool 24. Let's just start with the balance sheet here. What's one or two of the most important things that you focus on looking at this balance sheet? Obviously, it's a liquid cash rich situation that GitLab is in. Talk to us about the balance sheet.

Brian Robbins: For a public company where we're valued at today, we have a very clean balance sheet. I'm sorry, in the quarter that we just reported, first quarter, we generated over $100 million of free cash flow, and so you can see our cash balance, we have over a billion dollars of cash on the balance sheet and cash and equivalents as well as short term investments, and so, obviously, that from a company perspective and an investor perspective, I think that's really important. The company doesn't have any debt, per se, as a debt structure. we have obviously liabilities on the balance sheet, such as accounts payable, and payroll to be accrued and paid, and bonuses to be accrued and paid, from a bad debt perspective, we bill our customers typically net 30 net 45 days, we have a very good collections, very low bad debt, but from a balance sheet perspective, it's relatively pretty easy and very clean. We always collect upfront so we have a big deferred revenue, and so whether we sell a one, three, or five-year deal, we collect upfront, and so we recognize that as liability, and then we'll work that off over time as we deliver the service.

Karl Thiel: Two quick follow ups. One, this is a beautiful balance sheet, can you talk about how organic GitLab is in growth and why no acquisitions? Obviously, to the extreme end of the continuum in technology, you see what Salesforce has done. They've essentially acquired their way, somewhat brilliantly, really. you'd have to say, it's been an unbelievable success story, it hasn't necessarily drawn off a lot of internal organic innovation and growth relative to other companies, given how much acquiring of businesses they do, so why hasn't GitLab made acquisitions?

Tom Gardner: What's the leadership thinking there?

Brian Robbins: We have a corporate development team. They're out looking at different deals all the time. We've made a number of acquisitions, but they've been relatively small in size, and typically pre-revenue. One of the things with GitLab is we think it's so important to be on the same code base and not to actually attach a lot of modules to it. Part of GitLab is you have this, single pane of glass where everybody can see everything is happening at the same time. It's fully integrated, and so any acquisition that we do, we depreciate the software and rewrite it within GitLab very quickly. If we were to go out and acquire a company that $100 million in revenue or $500 million in revenue, that customer base is expecting that you have a contract to supply that product, and that customer base is going to expect that product under certain terms and conditions. It's very difficult to deprecate and rewrite it, put it in the GitLab platform, if you have these large contractual installed bases. Most of what we're doing in M&A is buy versus build analysis and time to market and acquires. For the companies that we acquire, they're relatively small, and it's buying the technology and then rewriting that and putting it back into GitLab, and offering that is a feature functionality to our customers.

Tom Gardner: Do you think and have there been acquisitions that are really geared to attract young developers using AI tools that might be the future developers at Fortune 100 companies?

Brian Robbins: All of our acquisitions, we have a great team doing our corporate development analysis, reaching out, looking at the market. We have a product roadmap of where we're going. Obviously, some of that includes AI. Some of it includes security. Some of it's around package product, and so they're looking at all types of acquisitions of which AI is a part of that. As we go through and look at it, AI developers may come on board as part of M&A.

Tom Gardner: Thank you. Last question on the balance sheet, just a simple one for clarity for our investing members. What's the difference between cash and cash and equivalence and short-term investments? Why do you sit $255 million in $1,849 million in the other?

Brian Robbins: It's the accounting definition of how you have to classify it on your balance sheet. Short term investments are, we have two banks that we primarily do our investments with. Typically the yield is greater than cash, but cash is cash, and short-term investments give us a little greater yield. We have an investment policy. I'm sure it's found in our handbook at some place on what we invest in, but it's to basically increase the yield of the return of the balance that we have.

Tom Gardner: Thank you very much for that. We'll go to the income statement, any reflections, and it's great. We still have Andy Cross here, and Andy spends so much time in the financial companies, if you have a follow up on this, Andy, but what stands out for you looking at the quarterly report ended April 30th on the income statement, Brian?

Brian Robbins: Thank you for pulling this out. We grew revenue 27% year or year, I think, which is top quartile for growth in software companies. I also am very proud of how we've done on gross profit. We reported a non-GAAP gross margin of 90%. We've been able to maintain that. Our SAS revenue has grown 35% year over year. It now comprises about 30% of our total revenue, and we've done that with getting increased operating leverage in the model. One of the things that we set out when we went public is we said one of the objectives for the company is, Number 1 objective is the growth, but we'll do that responsibly. We've been able to deliver, increased operating leverage in the model every quarter.

Tom Gardner: Somebody says, they're not GAAP profitable. There are investors who if they saw negative EPS, they simply wouldn't invest. Speak to somebody to explain to them how the model works and why it shows up as negative income but positive free cash flow.

Brian Robbins: Absolutely, Tom. We have a GAAP to non-GAAP reconciliation or 8K, so you can look at all the tables and what goes in and out of that. But the biggest item that we non-GAAP out is stock based compensation. That's not an actual cash charge, but it's a P&L charge. Our compensation philosophy from a company and being a newly public company is a combination of cash and stock for team members. The stock-based compensation is a charge that you need to take to your P&L, and that's the biggest difference between GAAP and non-GAAP reconciliation.

Andy Cross: Brian, can you quickly just describe the license business, and as a percentage of total sales, it continues to go down. Will you eventually see that as almost zero going forward once you get big enough?

Brian Robbins: It's a great question, Andy. We try to meet customers where they're at. You can basically buy GitLab as self managed, which is on-premise, which is license or you can buy SAS and host it. As I mentioned a little earlier in the call, our SAS business grew 35% year over year. Currently makes up 30% of our revenue. Companies, they like our SAS product because they can get, basically, stood up quicker. It's a lower total cost of ownership. A lot of people are familiar with buying SAS today. Because of the revenue recognition policies, we follow revenue recognition standard called ASC 606. We have to recognize a portion of our self-managed upfront, which goes into our license component. Because SAS is growing quickly, that's why you don't see license growing as quickly. But we don't compensate different for our reps, whether they sell a self-managed or a SAS license. We want to go in and have a consultative sales approach, go in, talk about the benefits of GitLab and then let the customer decide. Do you want to buy it in our Cloud or do you want to buy self-managed and put it in your Cloud? We charge the same price for that because once they get to that point, we don't want them to have to go through another several weeks of analysis on how much will it cost for us to host it versus GitLab hosting. We do this every day for a number of our customers, and we can do it very efficiently. That's part of the reason why our SAS business has grown so quickly.

Tom Gardner: As we head toward the cash flow statement, I'm going to drop in a personal question about your work approach at GitLab, Brian, almost seeming out of place, but I just can't not ask it for whatever reason. That is, down a continuum of 1-100, where 100 is maximally strategic as CFO and 1 is, you know, maximally accounting discipline as CFO, like, deep finance numbers. Where do you place yourself? Where do you like to operate as a CFO? Do you like to be in the brainstorm idea generation meetings? Do you like to be updated when things have been rolling, and you help to optimize and refine them? What's best suited for?

Brian Robbins: That's a great question. It's really interesting how this has changed over time. CFOs used to be very operationally focused, and when Sarbanes-Oxley came about due to the things that led to that, they became very accounting focused and so forth. I find myself more focused in operations and really aligning myself with the CRO and go-to-market. I learned at a very early age that if sales are going well, go-to-market is doing well, that's really what can drive the shareholder value of the company. I like to be strategic and focus on operations. But obviously, as a public company CFO, compliance and accounting and closing the books and all that is extremely important as well. It's hard to give a percentage between the two, but I think in today's age, you have to be very dynamic and understand the business, understand the growth levers, the drivers for shareholder value, and do the resource allocation around the company to get the best return for dollars invested, but then you also need to do that in the most compliant way and report out to shareholders as well. I think they're both really important, and I find myself partnering with the CRO a lot on go to market initiatives.

Tom Gardner: Thank you. Now we cruise down to the cash flow statement. For newer investors, this is usually the most confusing of all, but this is where you can net out and see that the company's generating over $100 million in operating cash from operating activities, and you come back up. Brian was mentioning the stock base compensation at 55 million, I'll ask a question about that in a second, but what stands out for you on the cash flow statement?

Brian Robbins: Once again, I think our financial statements are extremely clean and easy to understand. I think the most important thing for an investor to understand on a cash flow statement, especially cash flow from operations is, you basically start with the P&L, then you go back and you add back and subtract all the non-cash events to see how the company did on cash flow from operating. Investing for us is super simple. It's a change in investments, and so I think we have a very simplistic cash flow statement from a company perspective.

Tom Gardner: out of curiosity, what was the 1.7 million dollar charitable donation of common stock?

Brian Robbins: Thanks for that, Tom. GitLab has every quarter donates stock to the GitLab Foundation. I sit on the board of the GitLab Foundation as well. The GitLab Foundation, it's a stand-alone foundation, not part of GitLab. A non-profit that really focuses on investing to get earnings power return for people that can't get those. For every dollar invested, we have to get a certain amount return, and so we do a number of investments all around the world. I encourage you to go look at the GitLab Foundation website. It's a very data-driven process foundation, and we get a lot of requests from other foundations to basically help them measure the social impact that they're making and the return that they're making.

Tom Gardner: Thank you. On the stock-based compensation, one of the statistics we use as investors at the Motley Fool is to take the stock based compensation as a percentage of gross profit to look and try to get some association between what that grant is getting is driving in terms of growth up toward the top line of the business. We're certainly proponents of having ownership across the entire employee base. Every Motley Fool employee owns shares of our company, and that's pretty much been true for we've been in business for over 30 years. We're a private company, so we have an internal market system, all SEC approved. It's quite interesting, but that's a topic for another time. Fifty-five million as a percentage of 189 million is nearly 30%, which would be at the higher end of the range of most technology companies, so maybe explain your thinking as to why it's 55 million instead of 35 million or 75 million. I know there's no perfect answer there, but a lot of factors go into it, but why is GitLab sitting at a higher rate of granting within the overall growth dynamics of the business?

Brian Robbins: This is something obviously at the board level and company level is discussed on a quarterly basis. We look at our comps relative to all the other companies as well, and we actually probably sit right in the average of companies today. It's a form of compensating our employees cash and stock based compensation. As a newer public company, stock options that are out there. They come up for vast, and we recognize SBC charge related to that. But as a percentage, that number has slowly dropped, and something that we're focused on become GAAP profitable as well.

Tom Gardner: One of my favorite thinkers on compensation once told us, as I mentioned we often go contract people to be advisors for us. I think companies significantly underdo this. Many people would like to help, particularly, if they have some affiliation with the company or some connection to the industry, particularly if they're in semi retirement or retirement or in between, I mean, just generally, people will give you an hour, five hours. Steve Jobs once gave a very eloquent statement about calling and asking for help, and he had done that, I believe, as a 12-year-old or 11-year-old calling, I think, it was Bill Hewlett of Hewlett Packard and actually ended up with a summer internship there because of it. Basically, you should be calling people all the time. Well, one of the compensation advisors I spoke to years ago said, the most important thing about compensation is to not make it too much of a focus relative to peers. Get in the zone and work on your mission. Make sure the highest performers that are most passionate about your business are getting the rewards that they deserve, but you don't need to go into big outliers. It sounds to me from doing your comparisons to other technology companies, that's generally GitLab's compensation philosophy. True or false?

Brian Robbins: Absolutely. I would say true. If you focus solely on compensation, you're going to lose the team member. It's part of the brand, the mission that the company's after and everything else around it. GitLab being fully remote, we have a lot of top performers that don't want to drive two hours a day to and from the office, instead, they can be productive at home and actually be adding value to the company. You don't want to compete solely on compensation. We used to have a compensation calculator that was made public. We had to take it down because the accuracy of it and some of the people that were feeding our sources of that weren't happy with the data and how accurate it was. But we do have a compensation philosophy. It does include compensation, but there's a number of other things in that. But I think the important part from a team member perspective, is what do they want to accomplish? How can they personally and professionally develop and help lay out a path for them to accomplish that?

Tom Gardner: One more question for me here as we move off the financials and then back to Karl on the technical side. This is going back to kind of my apocalypse question previously, but Amazon came out as a dominant, very massive, growing cash-generating business, said, "We expect to succeed and grow, but do so with a smaller workforce than we actually have today."

Tom Gardner: Unusual. This is such an outlier in business history that you would have, let's say, 10 of the largest companies in the world with all massively liquid cash heavy balance sheets saying, we're reducing our workforce. That you would actually have lay-offs at the Magnificent 7 companies when there's not any clear negative headwinds or business reason for doing so. I guess, I'm coming back and asking this question again about, do you see similar dynamics at GitLab? You talked about maybe same count unemployment and more productivity, but are you starting to see that already or you're making those projections?

Brian Robbins: Obviously, we go through an annual planning process and look at the tools that we have available to make us more efficient. I think a lot of those companies where they say that they're laying off employees, they're actually laying off in one area to hire in another area because I think the skill sets are changing, and they're adapting to what's happening in the macro environment and how to change with that. Some AI tools out there may be great at call center request, and you may be able to do that through a very intelligent bot and actually answer 80-90% of the questions in the call center automatically through generative AI, and actually satisfy your customer, and so you may be able to reduce your call center agents by a certain amount, but then they're taking part of that, and it's a higher priced person investing in AI. The headcount isn't necessarily growing, but they're still making investment in areas for technology innovation. I think each company is different. It depends on the company where they're at, and their life cycle and what they're investing in, and what they're trying to accomplish.

Tom Gardner: Thank you. Karl.

Karl Thiel: I'll pop in. I like that metaphor about the call center. I actually wonder to pivot back to your product. I know you have Duo. I know you mentioned there's agents coming later in the year, and I wonder what will that call center metaphor look like for GitLab so that companies can actually increase their usage of it through agents, increase their throughput with perhaps less people?

Brian Robbins: It will be interesting. From GitLab's perspective, there's a lot of development, a lot of feature functionality to continue to work on, and so I could see things that we automate. We'll continue to reinvest back in the product in different ways as well. I would say we aren't too dissimilar to the companies that you mentioned, the Magnificent 7 on what they're doing and how they're changing, obviously, different scales and magnitudes. It'll be to lesser of an effect, but we're looking at how people work today, will dog food our own product, obviously. The impact and savings that we could make, and so we'll re pivot those investments in other areas for higher impact with that savings.

Karl Thiel: Nice. Just to be direct, I wonder what your roadmap is, if you could talk about it for the agents side. Your product, the way you talked about the Google Docs for DevSecOps, there's all these different teams looking through one pane of glass, working on different parts of the same software for different reasons. Will each team have agents that help them in their productivity in your platform work on this software? Is that the right view?

Brian Robbins: Yeah, absolutely. We're developing a number of different agents that these dual agents will do functions that people would normally do, but that they can be done automatically. We'll make them more productive for those functions, so they can focus on other areas. Think of an agent as a nonhuman doing what a human would otherwise do to actually get more, increased cycle times, increased productivity, get more code published and deployed.

Karl Thiel: I know we already talked about a solid partnership with AWS exactly about that, what we're talking about. Do you see any future partnerships with others, like Oracle or Google or other platforms?

Brian Robbins: We're always looking for partnerships on how their win-win. A lot of partnerships are more marketing press versus win-win for both parties.

Tom Gardner: For sure.

Brian Robbins: We're really deliberate about the partnerships that we enter into and make sure that we can get to general availability that we have sales targets associated with them, that both parties have skin in the game, and that they can be beneficial to our customers. I think there's a number of partnerships over time, but there's a high bar to basically get over to make announcements around those partnerships.

Karl Thiel: Speaking of partnerships, the AI labs are like the top dogs these days, at least from my viewpoint. Everyone wants partnerships with them. I wondered if you can call out if you have any partnerships, if you're using Anthropic, OpenAI, Mistral or what models are powering Duo, for example.

Brian Robbins: We've announced this, but currently today, Anthropic is one of the LLMs that we're using. One of the great things about GitLab is you can be model neutral, and so we have used and tested a number of different LLMs. With GitLab being a pure play Switzerland DevSecOps platform, we're actually creating those models and the results specifically for that ecosystem. Our team will constantly look at models that come out, what the results that they produce, the code that comes out of that and use the best model for our customer base today and in the future.

Karl Thiel: Nice. Now, like a future thinking question. If you had to describe GitLab's product with AI, top of mind, of course, in this conversation in two years from now, what does that experience look like for a developer?

Brian Robbins: I think, it's funny, Tom, the game that you played asking ChatGPT or whomever you asked around certified things. I think being that Switzerland for the software developer for DevSecOps, is really important, and that will be done through agents to create a use case and an experience for the developer that would be seamless, highly effective, and great payback to really enable them to do their job with joy and satisfaction.

Tom Gardner: Well, we're down to our final few questions, and these are helpful ones for us as investors, as well. What companies do you admire? It could be anything. It doesn't have to be companies that GitLab works with directly, although please feel free to share any of those. You could simply say, I absolutely love all of my experiences with Airbnb in my personal life. What are a few different public companies that you admire?

Brian Robbins: They're all for different reasons, but I look at a number of different companies for what they do, their metrics, or best practices and so forth. Some are for personal reasons, some are for investment reasons, and some are from a GitLab perspective. There's a number of different companies that I look at, but like I said, all for different reasons.

Tom Gardner: Is there a company you admire out there?

Brian Robbins: I don't want to give a particular company.

Tom Gardner: That's great. I got that.

Brian Robbins: I think there's a number of great companies out there [OVERLAPPING].

Tom Gardner: Out there. That's great.

Brian Robbins: It's great to learn from people who've been there, done that, from that perspective.

Tom Gardner: Excellent. Anything you can share on your own investment style, or what have you taught your children about investing?

Brian Robbins: My investment style now being a CFO is fairly conservative. I'm in a lot of bonds and index funds and diversity is very important. For my kids, I thought it was really important for them. One of the things that my father did for me at a young age was to introduce me to a stock broker. I don't know if they're called stock brokers anymore, but at age 14, I gave my son some money and basically introduced him to a gentleman that helps manage my money and basically wanted him to understand how to read financial statements, how people invest. There's a Warren Buffett style investing. There's a technical aspect of investing. Both of my kids are very astute in the markets and follow the markets very closely and have their own small investment portfolio that they track and monitor and trade in, so they can just understand it. I encourage people to get your kids involved early and to give them exposure to the market.

Tom Gardner: Obviously, you've made some investments in private companies in your life. For somebody who's thinking about making private company investments, any guidance for them or any thoughts that you have on how to do that most effectively?

Brian Robbins: It's tough. When you focus most of your time as a public company, CFO, you don't have a lot of time to follow the private markets and so a lot of my private investments have been relatively small and been through a friend to friend network, if you will. It's been basically given a small amount of money based on a thesis that they're going to try to solve, but private markets really take a lot of time to follow, the founders, so the technology, how things are evolving and so forth. I'm sure you guys have on your website a lot of great material around that.

Tom Gardner: Thank you for that. Given that companies remain private so much longer, it does almost require individuals to find opportunities to get onto platforms and make some private investments. Although, of course, it's still a very rich public market, abundantly great companies around the world, as well, and easier access to companies around the world, as well. GitLab is an eight time recommendation in our real money portfolios at the Motley Fool. It's a $6.7 billion market cap. It has about a billion dollar in cash and no debt on the balance sheet. It has great top line growth rates. One of the really interesting factors in life in the public markets is to follow how top line growth rates drive equity returns. Obviously, there are examples of companies that got out over their skis, had massive demand and no hope of ever generating a positive cash flow out of it and fell apart, but in general, demand is a really important factor for long-term investors and at the Motley Fool, we typically hold our investments at least five years and teach others to do the same. I'd love to just close, Brian. Final question with, what are you most excited about? Let's just say in the year ahead. Starting on this day to this day, 12 months from now, what are you most excited about at GitLab?

Brian Robbins: I think GitLab is really well positioned in the DevSecOps market. As I mentioned, we have over 50 million people on our platform today. We give a great return for investment on our ultimate product, and we enable people to build software better, faster, cheaper, more secure. Not only are we growing, we're doing it more effective quarter over quarter, and you can see the operating leverage in the business. As you look at growth, I look at growth relative to when you can break that inflection curve and continue to add operating leverage in the business. With 90% non-GAAP pros margins and great free cash flow generation, I think we're well positioned to make the investments that we're making in AI, as well as in security for the benefit of our current customers as well as our future customers.

Tom Gardner: Well, Brian Robbins, thank you so much for the hour. We learned a lot more about GitLab than we've learned so far. We try to learn as rapidly as we can. We have all of our AI engineers like Karl, all of our techies, and all of our investors working together to understand these companies better and better, and this hour certainly helps a lot. Thank you so much for this time.

Brian Robbins: Thanks, Tom, thanks, Karl. I really appreciate you having me on the show today.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Andy Cross has positions in Airbnb, Amazon, GitLab, Microsoft, Salesforce, and Snowflake. Karl Thiel has no position in any of the stocks mentioned. Tom Gardner has positions in Airbnb and Snowflake. The Motley Fool has positions in and recommends Airbnb, Amazon, GitLab, Microsoft, Oracle, Salesforce, and Snowflake. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.