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GitLab (GTLB) Posts Loss in Q3, Beats Revenue Estimates

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GitLab (GTLB - Free Report) reported a third-quarter fiscal 2023 non-GAAP loss of 10 cents per share, which surpassed the Zacks Consensus Estimate by 37.50% and was much narrower than the loss of 34 cents reported in the year-ago quarter.

Total revenues of $113 million also beat the consensus mark by 6.86% and jumped 69.1% year over year.

Top-Line Details

Subscriptions- self-managed and SaaS (87.1% of total revenues) revenues surged 64.7% year over year to $98.4 million. License- self-managed and other revenues (12.9% of total revenues) soared 107% year over year to $14.5 million.

Customers with more than $5K of Annual Recurring Revenue (ARR) increased to 6,469, up 59% year over year. Customers with more than $100K of ARR increased to 638, up 49% year over year.
 

GitLab Inc. Price, Consensus and EPS Surprise

GitLab Inc. Price, Consensus and EPS Surprise

GitLab Inc. price-consensus-eps-surprise-chart | GitLab Inc. Quote

 

The ultimate tier continues to be GitLab’s fastest growing tier, representing 39% of ARR in fiscal third-quarter 2023.

Moreover, the dollar-based Net Retention Rate was above 130% in the reported quarter.

Total Remaining Performance Obligation (RPO) grew 62% year over year to $393 million, and current RPO grew 67% to $278 million.

GitLab’s expanding clientele includes the likes of UBS, Agoda and CARFAX. Moreover, new product innovations are noteworthy.

In the fiscal third quarter, GitLab announced GitLab Govern, a new solution that brings together GitLab’s security and compliance capabilities. The company also launched TeamOps.

GitLab also launched Suggested Reviewers, its first machine learning-powered feature.

Meanwhile, GitLab partnered with Google Cloud to launch Cloud Seed. The partnership will allow customers to migrate to the cloud using a single platform.

Cloud Seed is built into the GitLab web UI and leverages the company’s CI/CD pipeline capabilities to give developers a frictionless experience and to make it easier to deploy their web applications directly to Google Cloud from GitLab.

Operating Details

Fiscal third-quarter 2023 non-GAAP gross margin contracted 100 basis points from the year-ago quarter to 88.7%. The year-over-year growth was negatively impacted by higher growth in low-margin SaaS revenues.

On a non-GAAP basis, research & development expenses increased 38% year over year to $31.1 million. Sales and marketing expenses were up 42.1% to $68.2 million. General and administrative expenses rose 69.2% to $22.5 million in the reported quarter.

On a non-GAAP basis, the operating loss was $21.6 million compared with the year-ago quarter’s loss of $23.9 million.

Balance Sheet

As of Oct 31, 2022, cash and cash equivalents and short-term investments were $927.8 million.

Guidance

For the fourth quarter of fiscal 2023, GitLab expects revenues between $119 million and $120 million.

Non-GAAP operating loss is expected in the range of $27-$26 million for the fiscal fourth quarter. Loss is expected between 15 cents and 14 cents per share.

For fiscal 2023, GitLab now expects revenues between $420.5 million and $421.5 million.

Non-GAAP operating loss is expected in the range of $100-$99 million for the fiscal year. Loss is expected between 56 cents and 55 cents per share.

For fiscal 2024, GitLab expects revenues to grow 40% year over year. Free cash flow is expected to hit breakeven in fiscal 2025.

Zacks Rank & Stocks to Consider

Currently, GitLab has a Zacks Rank #3 (Hold).

GitLab shares have lost 55.9% year to date, underperforming the Zacks Computer & Technology sector’s decline of 30.4%.

Some better-ranked stocks in the sector are Richardson Electronics (RELL - Free Report) , Sanmina (SANM - Free Report) and Super Micro Computer (SMCI - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Richardson Electronics, Sanmina and Super Micro Computer are up 87.6%, 55.6% and 89.6%, respectively, on a year-to-date basis.

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