GitLab Reports Second Quarter Fiscal Year 2023 Financial Results

Quarterly revenue of $101.0 million, up 74% year-over-year
Added largest number of base customers ever in a single quarter

Fiscal Second Quarter Highlights:

• Total revenue of $101.0 million
• GAAP operating margin of (65)%; Non-GAAP operating margin of (27)%
• GAAP net loss per share of $(0.40); Non-GAAP net loss per share of $(0.15)

SAN FRANCISCO, Sept. 06, 2022 (GLOBE NEWSWIRE) -- All-Remote - GitLab Inc. (NASDAQ: GTLB), The One DevOps Platform, today reported financial results for its second quarter fiscal year 2023, ended July 31, 2022.

“We continue to see strong momentum in our business, and our second quarter results indicate that the market is embracing our One DevOps Platform leadership position,” said Sid Sijbrandij, GitLab CEO and Co-Founder. “Enterprises are navigating economic uncertainty while still needing to embrace the imperatives of digital transformation, cloud migration, and app modernization. Delivering software fast and efficiently in a secure way is essential for success. GitLab empowers them to do exactly that all in one platform.”

“We are pleased to have delivered another strong quarter. Q2 FY23 resulted in 74% year-over-year revenue growth and our largest number of new base customers added ever in a single quarter,” said Brian Robins, GitLab CFO. “We also added a substantial number of new team members, and continue to hire across the organization. Our non-GAAP operating margin improved by 1,500 basis points year over year, and we remain committed to growing in a responsible manner.”

Second Quarter Fiscal Year 2023 Financial Highlights (in millions, except per share data and percentages):

	Q2 FY 2023				Q2 FY 2022				Y/Y Change
Revenue	$	101.0			$	58.1				74	%
GAAP Gross margin		87	%			88	%
Non-GAAP Gross margin		89	%			88	%
GAAP Operating loss	$	(65.3	)		$	(29.8	)		$	(35.5	)
Non-GAAP Operating loss	$	(27.0	)		$	(24.5	)		$	(2.5	)
GAAP Net loss attributable to GitLab	$	(59.0	)		$	(40.2	)		$	(18.8	)
Non-GAAP Net loss attributable to GitLab	$	(21.5	)		$	(26.1	)		$	4.6
GAAP Net loss per share attributable to GitLab	$	(0.40	)		$	(0.75	)		$	0.35
Non-GAAP Net loss per share attributable to GitLab	$	(0.15	)		$	(0.49	)		$	0.34

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

Second Quarter Fiscal Year 2023 Business Highlights:

• Customers with more than $5,000 of ARR increased to 5,864, up 61% from Q2 of fiscal year 2022.
• Customers with more than $100,000 of ARR increased to 593, up 55% from Q2 of fiscal year 2022.
• Dollar-Based Net Retention Rate above 130% in Q2 of fiscal year 2023.
• Released GitLab version 15 bringing forward new cutting edge DevOps capabilities in one platform. Additional releases in the quarter include 15.1 and 15.2, marking 130 consecutive months of innovation as of July 31, 2022.
• New and expansion customers included KeyBank, Indeed, and Worldline.
• GitLab partnered with Dynatrace, LaunchDarkly, Split, Flagsmith, and CloudBees to launch OpenFeature, the new standard for feature flagging and management solutions.
• GitLab Inc. won the 2021 Google Cloud Technology Partner of the Year for Application Development Award.
• GitLab Inc. ranked #49 on Fast Company’s 2022 Best Workplaces for Innovators list.

Third Quarter and Fiscal Year 2023 Financial Outlook

For the third quarter of fiscal year 2023, GitLab Inc. expects (in millions, except share and per share data):

	Q3 FY 2023 Guidance		FY 2023 Guidance
Revenue	$105.0 - $106.0		$411.0 - $414.0
Non-GAAP operating loss	$(27.5) - $(26.5)		$(111.5) - $(108.5)
Non-GAAP net loss per share assuming approximately 149 million and 148 million weighted average shares outstanding as of Q3 FY2023 and FY23, respectively	$(0.16) - $(0.15)		$(0.67) - $(0.64)

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.

Guidance for non-GAAP financial measures excludes stock-based compensation expense, amortization of acquired intangible assets, foreign exchange (gain) loss, and equity investment (gain) loss. 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 6, 2022, at 1:30 p.m. (PT) / 4:30 p.m. (ET) to discuss its second quarter and full year fiscal 2023 financial results. Investors and analysts should register for the call in advance by visiting https://gitlab.zoom.us/webinar/register/WN_qfI4bKSoR4-cWzuMp2xblQ. A replay of the call will be available on GitLab’s investor relations website (ir.gitlab.com).

About GitLab

GitLab is The One DevOps 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 DevOps 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, and equity investment (gain) loss. 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 appropriately 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;
• our transparency;
• our publicly available company Handbook;
• security and privacy breaches;
• customers staying on our open-source or free SaaS product offering;
• fluctuations in our operating results;
• our limited operating history;
• our ability to manage our growth effectively;
• 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 the armed conflict in Ukraine on our business; and
• general economic conditions (including changes in interest rates and inflation) 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, 2022(1)				January 31, 2022(1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	410,757			$	884,672
Short-term investments		519,433				50,031
Accounts receivable, net of allowance for doubtful accounts of $1,340 and $1,098 as of July 31, 2022 and January 31, 2022, respectively		89,344				77,233
Deferred contract acquisition costs, current		23,648				24,363
Prepaid expenses and other current assets		20,807				15,544
Total current assets		1,063,989				1,051,843
Property and equipment, net		5,459				3,271
Equity method investment		14,581				—
Goodwill		8,145				8,145
Intangible assets, net		5,081				6,285
Deferred contract acquisition costs, non-current		13,945				14,743
Other long-term assets		4,219				7,151
TOTAL ASSETS	$	1,115,419			$	1,091,438
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	5,379			$	4,984
Accrued expenses and other current liabilities		24,474				24,571
Accrued compensation and benefits		15,503				32,820
Deferred revenue, current		201,348				179,224
Total current liabilities		246,704				241,599
Deferred revenue, non-current		24,401				32,568
Other non-current liabilities		13,994				18,002
TOTAL LIABILITIES		285,099				292,169
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0000025 par value; 50,000 shares authorized as of July 31, 2022 and January 31, 2022; no shares issued and outstanding as of July 31, 2022 and January 31, 2022		—				—
Class A Common stock, $0.0000025 par value; 1,500,000 shares authorized as of July 31, 2022 and January 31, 2022; 83,025 and 27,141 shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively		—				—
Class B Common stock, $0.0000025 par value; 250,000 shares authorized as of July 31, 2022 and January 31, 2022; 65,746 and 119,747 shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively		—				—
Additional paid-in capital		1,413,491				1,320,479
Accumulated deficit		(638,460	)			(553,337	)
Accumulated other comprehensive income		3,456				7,724
Total GitLab stockholders’ equity		778,487				774,866
Noncontrolling interests		51,833				24,403
TOTAL STOCKHOLDERS’ EQUITY		830,320				799,269
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,115,419			$	1,091,438

__________
⁽¹⁾ As of July 31, 2022 and January 31, 2022, the condensed consolidated balance sheet includes assets of the consolidated variable interest entity, GitLab Information Technology (Hubei) Co., LTD (“JiHu”), of $60.9 million and $17.7 million, respectively, and liabilities of $3.6 million and $3.7 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 the Company.

GitLab Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited)
	Three Months Ended July 31,								Six Months Ended July 31,
		2022				2021				2022				2021
Revenue:
Subscription—self-managed and SaaS	$	88,936			$	51,860			$	165,859			$	96,768
License—self-managed and other		12,105				6,267				22,589				11,289
Total revenue		101,041				58,127				188,448				108,057
Cost of revenue:
Subscription—self-managed and SaaS		10,671				5,809				18,604				10,758
License—self-managed and other		2,359				1,383				4,274				2,859
Total cost of revenue		13,030				7,192				22,878				13,617
Gross profit		88,011				50,935				165,570				94,440
Operating expenses:
Sales and marketing		80,689				44,165				147,399				83,019
Research and development		39,520				22,603				71,350				43,943
General and administrative		33,104				13,998				54,996				23,337
Total operating expenses		153,313				80,766				273,745				150,299
Loss from operations		(65,302	)			(29,831	)			(108,175	)			(55,859	)
Interest income		3064				45				3,590				99
Other income (expense), net		1,500				(9,991	)			19,948				(11,043	)
Loss before income taxes and loss from equity method investment		(60,738	)			(39,777	)			(84,637	)			(66,803	)
Loss from equity method investment, net of tax		(816	)			—				(1,019	)			—
Provision for (benefit from) income taxes		(57	)			989				2,454				2,245
Net loss	$	(61,497	)		$	(40,766	)		$	(88,110	)		$	(69,048	)
Net loss attributable to noncontrolling interest		(2,473	)			(577	)			(2,987	)			(922	)
Net loss attributable to GitLab	$	(59,024	)		$	(40,189	)		$	(85,123	)		$	(68,126	)
Net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted	$	(0.40	)		$	(0.75	)		$	(0.58	)		$	(1.29	)
Weighted-average shares used to compute net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted		147,797				53,424				147,248				52,941

GitLab Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
		Six Months Ended July 31,
			2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss, including amounts attributable to noncontrolling interest		$	(88,110	)		$	(69,048	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense			55,218				8,663
Amortization of intangible assets			1,176				169
Depreciation expense			1,286				—
Amortization of deferred contract acquisition costs			21,618				15,099
Gain from deconsolidation of Meltano Inc.			(17,798	)			—
Loss from equity method investment			1,290				—
Net amortization of premiums or discounts on short-term investments			(1,293	)			—
Unrealized foreign exchange (gain) loss			(1,572	)			9,839
Other non-cash (income) expense			469				(143	)
Changes in assets and liabilities:
Accounts receivable			(13,568	)			(7,059	)
Prepaid expenses and other current assets			(5,488	)			(215	)
Deferred contract acquisition costs			(21,210	)			(15,112	)
Other long-term assets			2,700				(1,918	)
Accounts payable			528				(1,189	)
Accrued expenses and other current liabilities			90				4,910
Accrued compensation and benefits			(16,680	)			(2,385	)
Deferred revenue			17,549				19,613
Other long-term liabilities			(696	)			135
Net cash used in operating activities			(64,491	)			(38,641	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments			(520,664	)			(50,000	)
Proceeds from maturities of short-term investments			50,031				—
Purchases of property and equipment			(3,234	)			—
Deconsolidation of Meltano Inc.			(9,620	)			—
Net cash used in investing activities			(483,487	)			(50,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock upon exercise of stock options, including early exercises, net of repurchases			11,311				7,652
Issuance of common stock under employee stock purchase plan			9,554				—
Repurchase of common stock in a tender offer			—				(590	)
Contributions received from noncontrolling interests, net of issuance costs			57,673				26,450
Payments of deferred offering costs			—				(825	)
Net cash provided by financing activities			78,538				32,687
Impact of foreign exchange on cash and cash equivalents			(4,475	)			(642	)
Net decrease in cash and cash equivalents			(473,915	)			(56,596	)
Cash, cash equivalents, and restricted cash at beginning of period			887,172				282,850
Cash, cash equivalents, and restricted cash at end of period		$	413,257			$	226,254
Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the consolidated statements of cash flows above:
Cash and cash equivalents		$	410,757			$	226,254
Restricted cash, current included in prepaid expenses and other current assets			2,500				—
Total cash, cash equivalents and restricted cash		$	413,257			$	226,254

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,
		2022				2021				2022				2021
Gross profit on GAAP basis	$	88,011			$	50,935			$	165,570			$	94,440
Gross margin on GAAP basis		87	%			88	%			88	%			87	%
Stock-based compensation expense		1,585				239				2,375				391
Amortization of acquired intangibles		521				—				1,025				—
Gross profit on non-GAAP basis	$	90,117			$	51,174			$	168,970			$	94,831
Gross margin on non-GAAP basis		89	%			88	%			90	%			88	%
Sales and marketing on GAAP basis	$	80,689			$	44,165			$	147,399			$	83,019
Stock-based compensation expense		(14,851	)			(1,687	)			(21,902	)			(3,126	)
Sales and marketing on non-GAAP basis	$	65,838			$	42,478			$	125,497			$	79,893
Research and development on GAAP basis	$	39,520			$	22,603			$	71,350			$	43,943
Stock-based compensation expense		(11,339	)			(1,541	)			(16,375	)			(2,506	)
Research and development on non-GAAP basis	$	28,181			$	21,062			$	54,975			$	41,437
General and administrative on GAAP basis	$	33,104			$	13,998			$	54,996			$	23,337
Amortization of acquired intangibles		(74	)			(85	)			(151	)			(169	)
Stock-based compensation expense		(9,972	)			(1,765	)			(14,566	)			(2,640	)
General and administrative on non-GAAP basis	$	23,058			$	12,148			$	40,279			$	20,528
Loss from operations on GAAP basis	$	(65,302	)		$	(29,831	)		$	(108,175	)		$	(55,859	)
Stock-based compensation expense		37,747				5,232				55,218				8,663
Amortization of acquired intangibles		595				85				1,176				169
Loss from operations on non-GAAP basis	$	(26,960	)		$	(24,514	)		$	(51,781	)		$	(47,027	)
Other income (expense), net on GAAP basis	$	1,500			$	(9,991	)		$	19,948			$	(11,043	)
Gain from deconsolidation of Meltano Inc.		—				—				(17,798	)			—
Foreign exchange (gain) loss		(1,646	)			8,821				(2,506	)			9,872
Other income (expense), net on non-GAAP basis	$	(146	)		$	(1,170	)		$	(356	)		$	(1,171	)
Net loss attributable to GitLab common stockholders on GAAP basis	$	(59,024	)		$	(40,189	)		$	(85,123	)		$	(68,126	)
Stock-based compensation expense		37,747				5,232				55,218				8,663
Amortization of acquired intangibles		595				85				1,176				169
Gain from deconsolidation of Meltano Inc.		—				—				(17,798	)			—
Loss from equity method investment, net of tax		816				—				1,019				—
Foreign exchange (gain) loss		(1,646	)			8,821				(2,506	)			9,872
Net loss attributable to GitLab common stockholders on non-GAAP basis	$	(21,512	)		$	(26,051	)		$	(48,014	)		$	(49,422	)
Net loss per share on GAAP basis	$	(0.40	)		$	(0.75	)		$	(0.58	)		$	(1.29	)
Non-GAAP adjustments to net loss per share		0.25				0.26				0.25				0.36
Net loss per share on non-GAAP basis	$	(0.15	)		$	(0.49	)		$	(0.33	)		$	(0.93	)
Shares used in per share calculation - diluted on GAAP and non-GAAP basis		147,797				53,424				147,248				52,941

Media Contact:
Natasha Woods
GitLab Inc.
press@gitlab.com

Investor Contact:
Jack Andrews
GitLab Inc.
ir@gitlab.com