GitLab admits IT ineptitude in finance reporting is ongoing
(2023/12/07)
- Reference: 1701948728
- News link: https://www.theregister.co.uk/2023/12/07/gitlab_finance_control_warning/
- Source link:
GitLab has again warned of material weaknesses in its financial controls because of failures to design and maintain the correct internal IT systems.
Following the code shack's Q3 financial results – which reported above expectation revenue growth of 32 percent to $149.7 million – GitLab released a 10-Q legal filing to the Securities and Exchange Commission (SEC) disclosing that the business had "identified material weaknesses in … internal control over financial reporting."
"We did not design and maintain effective controls over certain information technology ('IT') general controls for information systems that are relevant to the preparation of our consolidated financial statements," reads the [1]report .
[2]
The statement repeats earlier warnings about lack of financial controls, and follows the publication in March of an "adverse opinion" by auditors KPMG based on full-year results for the period ending January 31, 2023.
[3]
[4]
[5]According to the SEC , an adverse opinion means the auditors have judged that a company's financial statements taken as a whole are not presented fairly in conformity with generally accepted accounting practices (GAAP) and do not satisfy the legal requirements of the Securities Act, S-X Article 2.
Financial and investment news website [6]Investopedia explained that an adverse opinion represents "a red flag for investors and can have major negative effects on stock prices."
[7]
The Register asked GitLab to comment further. The open core platform provider has yet to respond.
GitLab first disclosed what it is calling "material weaknesses in internal control over financial reporting" to regulators in December 2021 – [8]its first 10-Q filing since its Initial Public Offering on the Nasdaq stock exchange.
"We have not properly designed internal controls over the preparation of our financial statements insofar as it relates to appropriately performing effective and timely review of the accounting for and disclosure of non-routine transactions. Therefore, there was a risk that a potential material misstatement of the financial statements would occur without being prevented or detected on a timely basis," the newly listed entity admitted at the time.
[9]AI coding is 'inescapable' and here to stay, says GitLab
[10]GitLab deploys on a Friday and ... is down for a few hours
[11]One third wiped off value of GitLab shares, Wall Street didn't like weaker outlook
[12]Tech job bonfire rages on as Microsoft, GitLab and others join in
In the most recent filing, the business reiterated that it did not design and maintain effective program change management controls to ensure that "IT programs, data changes and migrations affecting financial IT applications and underlying records are identified, tested, authorized and implemented appropriately."
It failed to effectively implement "user access controls to ensure appropriate segregation of duties, restricted user and privileged access to our financial applications, data and programs to the appropriate personnel."
[13]
Financial reporting, review of stock-based compensation, and the accounting for non-routine transactions were all affected by these problems, the report reveals.
Although the biz admitted these weaknesses in financial controls, the report argues that the CEO and CFO "concluded that our unaudited condensed consolidated financial statements … present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with US generally accepted accounting practices."
GitLab also revealed it is making "remediation efforts" to fix the material weaknesses. The report states that it was "taking the steps that we believe will address the underlying causes of the material weaknesses," echoing a statement made in March.
GitLab has yet to report a net profit. For Q3 fiscal 2024, [14]it disclosed a net loss of $285.2 million – up from $48.5 million in the same period a year earlier. ®
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[1] https://www.sec.gov/ix?doc=/Archives/edgar/data/0001653482/000162828023040671/gtlb-20231031.htm
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/devops&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZXH6PPWVzjd5CE6IhsTG@QAAAMM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
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[5] https://www.sec.gov/corpfin/cf-manual/topic-4
[6] https://www.investopedia.com/terms/a/adverseopinion.asp#:~:text=Auditors%20will%20usually%20issue%20adverse,by%20regular%20SEC%20filing%20requirements
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[8] https://www.sec.gov/ix?doc=/Archives/edgar/data/0001653482/000162828021024605/gtlb-20211031.htm
[9] https://www.theregister.com/2023/09/05/gitlab_ai_coding/
[10] https://www.theregister.com/2023/07/07/gitlab_outage/
[11] https://www.theregister.com/2023/03/14/gitlab_q4_2023/
[12] https://www.theregister.com/2023/02/10/tech_job_cuts_gitlab_microsoft/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/devops&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZXH6PPWVzjd5CE6IhsTG@QAAAMM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://ir.gitlab.com/news-releases/news-release-details/gitlab-reports-third-quarter-fiscal-year-2024-financial-results
[15] https://whitepapers.theregister.com/
Following the code shack's Q3 financial results – which reported above expectation revenue growth of 32 percent to $149.7 million – GitLab released a 10-Q legal filing to the Securities and Exchange Commission (SEC) disclosing that the business had "identified material weaknesses in … internal control over financial reporting."
"We did not design and maintain effective controls over certain information technology ('IT') general controls for information systems that are relevant to the preparation of our consolidated financial statements," reads the [1]report .
[2]
The statement repeats earlier warnings about lack of financial controls, and follows the publication in March of an "adverse opinion" by auditors KPMG based on full-year results for the period ending January 31, 2023.
[3]
[4]
[5]According to the SEC , an adverse opinion means the auditors have judged that a company's financial statements taken as a whole are not presented fairly in conformity with generally accepted accounting practices (GAAP) and do not satisfy the legal requirements of the Securities Act, S-X Article 2.
Financial and investment news website [6]Investopedia explained that an adverse opinion represents "a red flag for investors and can have major negative effects on stock prices."
[7]
The Register asked GitLab to comment further. The open core platform provider has yet to respond.
GitLab first disclosed what it is calling "material weaknesses in internal control over financial reporting" to regulators in December 2021 – [8]its first 10-Q filing since its Initial Public Offering on the Nasdaq stock exchange.
"We have not properly designed internal controls over the preparation of our financial statements insofar as it relates to appropriately performing effective and timely review of the accounting for and disclosure of non-routine transactions. Therefore, there was a risk that a potential material misstatement of the financial statements would occur without being prevented or detected on a timely basis," the newly listed entity admitted at the time.
[9]AI coding is 'inescapable' and here to stay, says GitLab
[10]GitLab deploys on a Friday and ... is down for a few hours
[11]One third wiped off value of GitLab shares, Wall Street didn't like weaker outlook
[12]Tech job bonfire rages on as Microsoft, GitLab and others join in
In the most recent filing, the business reiterated that it did not design and maintain effective program change management controls to ensure that "IT programs, data changes and migrations affecting financial IT applications and underlying records are identified, tested, authorized and implemented appropriately."
It failed to effectively implement "user access controls to ensure appropriate segregation of duties, restricted user and privileged access to our financial applications, data and programs to the appropriate personnel."
[13]
Financial reporting, review of stock-based compensation, and the accounting for non-routine transactions were all affected by these problems, the report reveals.
Although the biz admitted these weaknesses in financial controls, the report argues that the CEO and CFO "concluded that our unaudited condensed consolidated financial statements … present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with US generally accepted accounting practices."
GitLab also revealed it is making "remediation efforts" to fix the material weaknesses. The report states that it was "taking the steps that we believe will address the underlying causes of the material weaknesses," echoing a statement made in March.
GitLab has yet to report a net profit. For Q3 fiscal 2024, [14]it disclosed a net loss of $285.2 million – up from $48.5 million in the same period a year earlier. ®
Get our [15]Tech Resources
[1] https://www.sec.gov/ix?doc=/Archives/edgar/data/0001653482/000162828023040671/gtlb-20231031.htm
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/devops&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZXH6PPWVzjd5CE6IhsTG@QAAAMM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
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[5] https://www.sec.gov/corpfin/cf-manual/topic-4
[6] https://www.investopedia.com/terms/a/adverseopinion.asp#:~:text=Auditors%20will%20usually%20issue%20adverse,by%20regular%20SEC%20filing%20requirements
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/devops&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZXH6PPWVzjd5CE6IhsTG@QAAAMM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.sec.gov/ix?doc=/Archives/edgar/data/0001653482/000162828021024605/gtlb-20211031.htm
[9] https://www.theregister.com/2023/09/05/gitlab_ai_coding/
[10] https://www.theregister.com/2023/07/07/gitlab_outage/
[11] https://www.theregister.com/2023/03/14/gitlab_q4_2023/
[12] https://www.theregister.com/2023/02/10/tech_job_cuts_gitlab_microsoft/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/devops&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZXH6PPWVzjd5CE6IhsTG@QAAAMM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://ir.gitlab.com/news-releases/news-release-details/gitlab-reports-third-quarter-fiscal-year-2024-financial-results
[15] https://whitepapers.theregister.com/
David 132
Honestly, I’m just trying to wrap my head around the published numbers. Losses in Q3 of $285M, on revenue of $148M… just what are they doing?
Code hosting, right? And they make a big play of being all-in on remote working, so one presumes they have little to no real estate overhead.
Where does $435M of spending go, then? Payroll? Maybe, even if I highly doubt that all 1600 employees (yes, I cheated and checked their Wikipedia page) are being paid at Silicon Valley rates.
Genuinely mystified.
ChoHag
> Genuinely mystified.
Apparently so are they. Still.
Jon 37
Providing a fairly large, free, cloud storage service is expensive. Server costs, support and moderation costs, development costs.
GitHub is a great marketing tool for Microsoft, so they don't care if it makes a bit of a loss. They can also use the Microsoft cloud infrastructure. GitLab doesn't have either of those backing it.
Adverts? Anyone using GitLab will have an ad blocker. (Except for you, you annoying commentator who is going to reply to this post saying "I use GitLab and don't have an ad blocker". But I suspect you're in a minority).
That leaves selling their professional products. Unfortunately not a great business model, and it's a competitive market. They are squeezed between big companies such as Microsoft at the high end, and free software at the low end.
Well, maybe that leaves an IPO and taking the money as the best business model for the people involved. Which they seem to have done.
"failures to design and maintain the correct internal IT systems."
You know what they say about cobblers' children?