GitLab Reports Second Quarter Fiscal Year 2024 Financial Results

Sep 05, 2023

Quarterly revenue of $139.6 million, up 38% year-over-year

Fiscal Second Quarter Highlights:

Total revenue of $139.6 million
GAAP operating margin of (39)%; Non-GAAP operating margin of (3)%
GAAP net loss per share of $(0.33); Non-GAAP net income per share of $0.01

SAN FRANCISCO, Sept. 05, 2023 (GLOBE NEWSWIRE) -- All-Remote - GitLab Inc. ( GTLB), The DevSecOps Platform, today reported financial results for its second quarter fiscal year 2024, ended July 31, 2023.

“GitLab’s strong quarter is a result of our focus on creating a differentiated and innovative DevSecOps platform and executing on a strong go-to-market motion,” said Sid Sijbrandij, GitLab CEO and co-founder. “In addition, Gartner and Forrester recognized GitLab as a category leader, which is an important milestone for the company and signals the shift from point solutions to platforms. We believe that our rapid pace of product innovation and strong customer demand position us to capture a greater share of the estimated $40 billion total addressable market opportunity.”

“We are pleased with our continued business momentum as it shows the value proposition of our market-leading DevSecOps platform is resonating in the market,” said Brian Robins, GitLab chief financial officer. “Our revenue of $139.6 million this quarter represents an increase of 38% organically from the prior year, which shows that we continue to execute while driving responsible growth.”

Second Quarter Fiscal Year 2024 Financial Highlights (in millions, except per share data and percentages):

	Q2 FY 2024			Q2 FY 2023			Y/Y Change
Revenue	$	139.6		$	101.0			38	%
GAAP Gross margin		89	%		87	%
Non-GAAP Gross margin		91	%		89	%
GAAP Operating loss	$	(54.1	)	$	(65.3	)	$	11.2
Non-GAAP Operating loss	$	(4.3	)	$	(27.0	)	$	22.7
GAAP Net loss attributable to GitLab	$	(50.1	)	$	(59.0	)	$	8.9
Non-GAAP Net income (loss) attributable to GitLab	$	1.9		$	(21.5	)	$	23.4
GAAP Net loss per share attributable to GitLab	$	(0.33	)	$	(0.40	)	$	0.07
Non-GAAP Net income (loss) per share attributable to GitLab	$	0.01		$	(0.15	)	$	0.16

A reconciliation between GAAP and non-GAAP financial measures is contained in this release under the section titled “Non-GAAP Financial Measures.”

Business Highlights:

Customers with more than $5,000 of ARR increased to 7,815, up 33% from Q2 of fiscal year 2023.Customers with more than $100,000 of ARR increased to 810, up 37% from Q2 of fiscal year 2023.Dollar-Based Net Retention Rate was 124% in Q2 of fiscal year 2024.Named as a leader in the inaugural Gartner® Magic Quadrant™ for DevOps Platforms.Recognized as the only Leader in The Forrester Wave™: Integrated Software Delivery Platforms, Q2 2023 Report.Appointed Chris Weber as Chief Revenue Officer. A long-time Microsoft executive, Weber will oversee all field operations, including sales, customer success, and strategic partnerships.Released inaugural reports for environmental, social, and governance (ESG) and diversity, inclusion, and belonging (DIB). These reports highlight GitLab’s progress and performance across key ESG & DIB priorities.Announced the release of GitLab 16.0 to deliver AI-powered workflows, strengthen software supply chain security, and help customers meet complex compliance and regulatory needs.Launched the DevSecOps World Tour in Q2 of fiscal year 2024, which includes in-person customer events in 14 global cities.

Third

Quarter and Fiscal Year 2024 Financial Outlook

For the third quarter and fiscal year 2024, GitLab Inc. expects (in millions, except share and per share data):

Q3 FY 2024 Guidance FY 2024 GuidanceRevenue$140.0 - $141.0 $555.0 - $557.0Non-GAAP operating loss$(6.0) - $(5.0) $(33.0) - $(30.0)Non-GAAP net loss per share assuming approximately
155 million and 154 million weighted average shares
outstanding as of Q3 FY2024 and FY24, respectively$(0.02) - $(0.01) $(0.08) - $(0.05)

These statements are forward-looking and actual results may differ materially as a result of many factors. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below in Non-GAAP Financial Measures. We have not provided the most directly comparable GAAP financial guidance measures because certain items are out of our control or cannot be reasonably predicted. Accordingly, a reconciliation of non-GAAP guidance for operating loss and net loss per share to the corresponding GAAP measures is not available.

Conference Call Information

GitLab will host a conference call today, September 5, 2023, at 1:30 p.m. (PT) / 4:30 p.m. (ET) to discuss its second quarter of fiscal 2024 financial results. Investors and analysts should register for the call in advance by visiting https://gitlab.zoom.us/webinar/register/WN_v_NmrHleRDeFXh4MyaoN1g#/registration. A replay of the call will be available on GitLab’s investor relations website (ir.gitlab.com).

About GitLab

GitLab is the most comprehensive DevSecOps Platform that empowers organizations to maximize the overall return on software development by delivering software faster and efficiently, while strengthening security and compliance. GitLab’s single application is easier to use, leads to faster cycle time and allows visibility throughout and control over all stages of the DevSecOps lifecycle. With GitLab, every team in your organization can collaboratively plan, build, secure, and deploy software to drive business outcomes faster with complete transparency, consistency and traceability.

Non-GAAP Financial Measures

GitLab believes non-GAAP measures are useful in evaluating its operating performance. GitLab uses this supplemental information to evaluate its ongoing operations and for internal planning and forecasting purposes. GitLab believes that non-GAAP financial information, when taken collectively with its GAAP financial information, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. We define non-GAAP financial measures as GAAP measures, excluding stock-based compensation expense, amortization of acquired intangible assets, foreign exchange (gain) loss, (gain) loss from a deconsolidation of a subsidiary, equity method investment (gain) loss, changes in the fair value of acquisition related contingent consideration, charitable donation of common stock, and restructuring charges. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

Forward-Looking Statements

This press release and the accompanying earnings call contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Although we believe that the expectations reflected in the forward-looking statements contained in this release and the accompanying earnings call are reasonable, they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results or outcomes to be materially different from any future results or outcomes expressed or implied by the forward-looking statements. These risks, uncertainties, assumptions, and other factors include, but are not limited to the following:

our ability to effectively manage future growth;our revenue growth rate in the future;our ability to achieve and sustain profitability, our business, financial condition, and operating results;our intense competition and loss of market share to our competitors;the market for our services may not grow;a decline in our customer renewals and expansions;fluctuations in our operating results;our ability to manage our growth effectively;our plans to incorporate artificial intelligence features into our products;our transparency;our publicly available company Handbook;security and privacy breaches;customers staying on our free self-managed or SaaS product offering;our limited operating history;our ability to respond to rapid technological changes;our ability to accurately predict the long-term rate of customer subscription renewals or adoption, or the impact of these renewals and adoption;our hiring model;the effects of regional and global conflict, including armed conflict in Ukraine, on our business; andgeneral economic conditions (including changes in interest rates, inflation, increased volatility in the capital markets and instability in the global banking sector) and slow or negative growth of our markets.

Further information on these and additional risks, uncertainties, and other factors that could cause actual outcomes and results to differ materially from those included in or contemplated by the forward-looking statements contained in this release are included under the caption “Risk Factors” and elsewhere in the filings and reports we make with the Securities and Exchange Commission. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law.

Operating Metrics

Annual Recurring Revenue (“ARR”): We define annual recurring revenue as the annual run-rate revenue of subscription agreements, including our self-managed and SaaS offerings but excluding professional services, from all customers as measured on the last day of a given month. We calculate ARR by taking the monthly recurring revenue (“MRR”) and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts of subscriptions, including our self-managed license, self-managed subscription, and SaaS subscription offerings but excluding professional services.

Dollar-Based Net Retention Rate: We calculate Dollar-Based Net Retention Rate as of a period end by starting with our customers as of the 12 months prior to such period end (“Prior Period ARR”). We then calculate the ARR from these customers as of the current period end (“Current Period ARR”). The calculation of Current Period ARR includes any upsells, price adjustments, user growth within a customer, contraction, and attrition. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the Dollar-Based Net Retention Rate.

GitLab Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)

July 31, 2023⁽¹⁾ January 31, 2023⁽¹⁾ASSETS CURRENT ASSETS: Cash and cash equivalents $273,225 $295,402 Short-term investments 713,058 641,249 Accounts receivable, net of allowance for doubtful accounts of $180 and $1,564 as of July 31, 2023 and January 31, 2023, respectively 105,815 130,479 Deferred contract acquisition costs, current 25,069 26,505 Prepaid expenses and other current assets 26,053 24,327 Total current assets 1,143,220 1,117,962 Property and equipment, net 4,080 5,797 Operating lease right-of-use assets 673 998 Equity method investment 10,574 12,682 Goodwill 8,145 8,145 Intangible assets, net 2,774 3,901 Deferred contract acquisition costs, non-current 14,743 15,628 Other long-term assets 4,860 4,087 TOTAL ASSETS $1,189,069 $1,169,200 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $4,165 $5,184 Accrued expenses and other current liabilities 24,643 25,954 Accrued compensation and benefits 23,504 20,776 Deferred revenue, current 268,883 254,382 Total current liabilities 321,195 306,296 Deferred revenue, non-current 25,860 28,355 Other non-current liabilities 10,774 9,824 TOTAL LIABILITIES 357,829 344,475 STOCKHOLDERS’ EQUITY: Preferred stock, $0.0000025 par value; 50,000 shares authorized as of July 31, 2023 and January 31, 2023;
no shares issued and outstanding as of July 31, 2023 and January 31, 2023 — — Class A Common stock, $0.0000025 par value; 1,500,000 shares authorized as of July 31, 2023 and January 31, 2023;
103,432 and 94,655 shares issued and outstanding as of July 31, 2023 and January 31, 2023, respectively — — Class B Common stock, $0.0000025 par value; 250,000 shares authorized as of July 31, 2023 and January 31, 2023;
51,178 and 56,489 shares issued and outstanding as of July 31, 2023 and January 31, 2023, respectively — — Additional paid-in capital 1,610,072 1,497,373 Accumulated deficit (828,197) (725,648)Accumulated other comprehensive income (loss) 1,782 (705)Total GitLab stockholders’ equity 783,657 771,020 Noncontrolling interests 47,583 53,705 TOTAL STOCKHOLDERS’ EQUITY 831,240 824,725 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,189,069 $1,169,200

__________
⁽¹⁾_{As of July 31, 2023 and January 31, 2023, the consolidated balance sheet includes assets of the consolidated variable interest entity, GitLab Information Technology (Hubei) Co., LTD (“JiHu”), of $52.5 million and $62.8 million, respectively, and liabilities of $7.3 million and $8.9 million, respectively. The assets of JiHu can be used only to settle obligations of JiHu and creditors of JiHu do not have recourse against the general credit of GitLab Inc.}

GitLab Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

Three Months Ended July 31, Six Months Ended July 31, 2023 2023 2022 2023 2022 Revenue: Subscription—self-managed and SaaS $122,096 $88,936 $233,287 $165,859 License—self-managed and other 17,485 12,105 33,172 22,589 Total revenue 139,581 101,041 266,459 188,448 Cost of revenue: Subscription—self-managed and SaaS 10,871 10,671 21,762 18,604 License—self-managed and other 3,825 2,359 6,873 4,274 Total cost of revenue 14,696 13,030 28,635 22,878 Gross profit 124,885 88,011 237,824 165,570 Operating expenses: Sales and marketing 92,116 80,689 178,653 147,399 Research and development 49,007 39,520 99,394 71,350 General and administrative 37,819 33,104 72,067 54,996 Total operating expenses 178,942 153,313 350,114 273,745 Loss from operations (54,057) (65,302) (112,290) (108,175)Interest income 9,112 3,064 16,427 3,590 Other income (expense), net (1,330) 1,500 (1,077) 19,948 Loss before income taxes and loss from equity method investment (46,275) (60,738) (96,940) (84,637)Loss from equity method investment, net of tax (917) (816) (1,665) (1,019)Provision for (benefit from) income taxes 4,016 (57) 5,502 2,454 Net loss $(51,208) $(61,497) $(104,107) $(88,110)Net loss attributable to noncontrolling interest (1,128) (2,473) (1,558) (2,987)Net loss attributable to GitLab $(50,080) $(59,024) $(102,549) $(85,123)Net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted $(0.33) $(0.40) $(0.67) $(0.58)Weighted-average shares used to compute net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted 153,644 147,797 152,683 147,248

GitLab Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six Months Ended July 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss, including amounts attributable to noncontrolling interest $(104,107) $(88,110)Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 78,698 55,218 Charitable donation of common stock 5,350 — Amortization of intangible assets 1,125 1,176 Depreciation expense 2,206 1,286 Amortization of deferred contract acquisition costs 20,619 21,618 Gain from deconsolidation of Meltano Inc. — (17,798)Loss from equity method investment 2,108 1,290 Net amortization of premiums or discounts on short-term investments (8,494) (1,293)Unrealized foreign exchange loss (gain), net 825 (1,572)Other non-cash (income) expense, net (103) 469 Changes in assets and liabilities: Accounts receivable 25,281 (13,568)Prepaid expenses and other current assets (4,248) (5,488)Deferred contract acquisition costs (18,137) (21,210)Other long-term assets (721) 2,700 Accounts payable (1,023) 528 Accrued expenses and other current liabilities 1,183 90 Accrued compensation and benefits 2,611 (16,680)Deferred revenue 11,175 17,549 Other non-current liabilities 1,800 (696)Net cash provided by (used in) operating activities 16,148 (64,491)CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments (334,996) (520,664)Proceeds from maturities of short-term investments 272,984 50,031 Purchases of property and equipment (533) (3,234)Deconsolidation of Meltano Inc. — (9,620)Escrow payment related to business combination, after acquisition date (2,500) — Net cash used in investing activities (65,045) (483,487)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of common stock upon exercise of stock options, including early exercises, net of repurchases 17,777 11,311 Issuance of common stock under employee stock purchase plan 7,751 9,554 Contributions received from noncontrolling interests, net of issuance costs — 57,673 Net cash provided by financing activities 25,528 78,538 Impact of foreign exchange on cash and cash equivalents (1,308) (4,475)Net decrease in cash and cash equivalents (24,677) (473,915)Cash, cash equivalents, and restricted cash at beginning of period 297,902 887,172 Cash, cash equivalents, and restricted cash at end of period $273,225 $413,257 Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above: Cash and cash equivalents $273,225 $410,757 Restricted cash, included in prepaid expenses and other current assets — 2,500 Total cash, cash equivalents and restricted cash $273,225 $413,257

GitLab Inc.
Reconciliation of GAAP to Non-GAAP
(in thousands, except per share data)
(unaudited)

Three Months Ended July 31, Six Months Ended July 31, 2023 2022 2023 2022 Gross profit on GAAP basis $124,885 $88,011 $237,824 $165,570 Gross margin on GAAP basis 89% 87% 89% 88%Stock-based compensation expense 1,698 1,585 3,112 2,375 Amortization of acquired intangibles 521 521 1,025 1,025 Restructuring charges 46 — 463 — Gross profit on non-GAAP basis $127,150 $90,117 $242,424 $168,970 Gross margin on non-GAAP basis 91% 89% 91% 90% Sales and marketing on GAAP basis $92,116 $80,689 $178,653 $147,399 Stock-based compensation expense (21,295) (14,851) (35,059) (21,902)Restructuring charges (118) — (3,677) $— Sales and marketing on non-GAAP basis $70,703 $65,838 $139,917 $125,497 Research and development on GAAP basis $49,007 $39,520 $99,394 $71,350 Stock-based compensation expense (12,477) (11,339) (24,179) (16,375)Restructuring charges 12 — (2,047) — Research and development on non-GAAP basis $36,542 $28,181 $73,168 $54,975 General and administrative on GAAP basis $37,819 $33,104 $72,067 $54,996 Amortization of acquired intangibles (25) (74) (100) (151)Stock-based compensation expense (10,898) (9,972) (16,348) (14,566)Restructuring charges (20) — (1,638) — Charitable donation of common stock (2,675) — (5,350) — General and administrative on non-GAAP basis $24,201 $23,058 $48,631 $40,279 Loss from operations on GAAP basis $(54,057) $(65,302) $(112,290) $(108,175)Stock-based compensation expense 46,368 37,747 78,698 55,218 Amortization of acquired intangibles 546 595 1,125 1,176 Restructuring charges 172 — 7,825 — Charitable donation of common stock 2,675 — 5,350 — Loss from operations on non-GAAP basis $(4,296) $(26,960) $(19,292) $(51,781) Other income (expense), net on GAAP basis $(1,330) $1,500 $(1,077) $19,948 Gain from deconsolidation of Meltano Inc. — — — (17,798)Foreign exchange gains (losses), net 1,268 (1,646) 994 (2,506)Other income, net on non-GAAP basis $(62) $(146) $(83) $(356) Net loss attributable to GitLab common stockholders on GAAP basis $(50,080) $(59,024) $(102,549) $(85,123)Stock-based compensation expense 46,368 37,747 78,698 55,218 Amortization of acquired intangibles 546 595 1,125 1,176 Restructuring charges 172 — 7,825 — Charitable donation of common stock 2,675 — 5,350 — Gain from deconsolidation of Meltano Inc. — — — (17,798)Loss from equity method investment, net of tax 917 816 1,665 1,019 Foreign exchange gains (losses), net 1,268 (1,646) 994 (2,506)Net income (loss) attributable to GitLab common stockholders on non-GAAP basis $1,866 $(21,512) $(6,892) $(48,014) GAAP net loss per share, basic and diluted $(0.33) $(0.40) $(0.67) $(0.58)Non-GAAP net income (loss) per share, basic $0.01 $(0.15) $(0.05) $(0.33)Non-GAAP net income (loss) per share, diluted $0.01 $(0.15) $(0.05) $(0.33) Shares used in per share calculation - basic on GAAP basis 153,644 147,797 152,683 147,248 Effect of dilutive securities ⁽¹⁾ 7,473 — — — Shares used in per share calculation - diluted on non-GAAP basis 161,117 147,797 152,683 147,248

⁽¹⁾_{Shares used for net income per share on non-GAAP basis include incremental dilutive shares related to restricted stock units, options, and shares issuable under GitLab Inc.’s 2021 Employee Stock Purchase Plan that are anti-dilutive on a GAAP basis.}

Media Contact:
Lisa Boughner
VP, Global Communications
GitLab Inc.
[email protected]

Investor Contact:
Jack Andrews
VP, Investor Relations
GitLab Inc.
[email protected]

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