GitLab’s Horrible Management

By Douglas A. McIntyre Published Mar 14, 9:30AM EDT

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GitLab’s Horrible Management — © grinvalds / Getty Images

GitLab Inc. (NASDAQ: GTLB | GTLB Price Prediction) is tech’s most recent dumpster fire. As it reported earnings, its forecasts for the next fiscal year and quarter were light. The stock was pummeled after the earnings news, dropping 32% to $30. It traded at $70 last August. (Here are the 25 biggest product flops of the past 10 years.)
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Revenue was not a major problem, as it was up 58% to $123 million. However, GitLab bombed on the bottom line: it lost $39 million. The current stock market punishes money-losing tech companies. However, GitLab can lose money almost forever. It has over $900 million in cash and short-term investments.
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What imploded the stock price was its revenue forecast for the current quarter, as low as $117 million. Rapid growth at the top line remains prized among investors, particularly when it can eat into losses.
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GitLab’s management signaled that hiring had outpaced revenue growth by too much. It said it would lay off 7% of its workers. This means that it cannot grow enough to make those employees valuable in the future. This is particularly telling for a company with its cash balance. Investors have every reason to dump the stock.
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GitLab has a mundane business that does not have a wide moat. Its products allow developers to build and deliver secure software. Gartner has a long list of companies that compete with GitLab, including Microsoft and IBM.

Until recently, some investors looked at GitLab as tech’s next $1 billion in revenue company. That goal seems less likely.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.