Q3 2024 Gitlab Inc Earnings Call

So Randy and get less Chief Financial Officer, Brian Robbins will provide commentary on the quarter and fiscal year. Please.

Please note, we will be opening up the call for panelists questions to.

Speaker 1: questions. To ask a question please use the chat feature and post your questions directly to IAR questions using the drop down menu. Before we begin I'll cover this.

To ask a question. Please use the chat feature and post your questions directly to the IR questions using the dropdown menu.

Before we begin I'll cover the safe Harbor statement.

Speaker 1: During this conference call, we may make forward-looking statements within the meaning of the federal securities laws. These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated.

During this conference call, we may make forward looking statements within the meaning of the federal Securities laws.

These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated.

Speaker 1: For a complete discussion of risk associated with these forward-looking statements in our business.

For a complete discussion of risks associated with these forward looking statements in our business. Please.

Speaker 1: Please refer to our earnings release distributed today in our SEC filings, including our most recent quarterly report on Form 10Q and our most recent annual report on Form 10K. Our forward-looking statements are based upon information currently available to us.

Please refer to our earnings release distributed today and our SEC filings.

Including our most recent quarterly report on Form 10-Q, and our most recent annual report on Form 10-K. Our forward looking statements are based upon information currently available to us.

Speaker 1: We caution you to not place undue reliance on forward looking statements. And we undertake no duty or obligation to update or revise any forward looking statement, or to report any future events or circumstances, or to reflect the occurrence of unanticipated events.

We caution you to not place undue reliance on forward looking statements.

And we undertake no duty or obligation to update or revise any forward looking statement or to report any future events or circumstances or to reflect the occurrence of unanticipated events.

Speaker 1: We may also discuss financial performance measures that differ from comparable measures contained in our financial statements prepared in accordance with U.S. gaps. These non- GAAP measures are not intended to be a substitute for our gap results.

We may also discuss financial performance measures that differ from comparable measures contained in our financial statements prepared in accordance with U S. GAAP. These.

These non-GAAP measures are not intended to be a substitute for our GAAP results.

Speaker 1: A reconciliation of these non- GAAP measures to the most comparable GAAP financial measures is included in our earnings press release, which along with these reconciliations and additional supplemental information are available at ir.gitlab.com.

A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release, which along with these reconciliations and additional supplemental information are available at IR jacket lab Dot com.

Speaker 1: A replay of today's call will also be posted on ir.getlab.com.

A replay of today's call will also be posted on IR dot get lab dot com.

Speaker 1: I will now turn the call over to get let co-founder and chief executive officer Sid Sibrandi.

I will now turn the call over to get Labs, co founder and Chief Executive Officer said so Randy.

Speaker 2: Thank you for joining us today. We delivered a strong quarter. Revenue grew, 32% year-over-year, driven by the continued adoption of our desk of platforms.

Thank you for joining us today, we delivered a strong quarter revenue grew 32% year over year, driven by the continued adoption of our desk checkups platform.

Speaker 2: GitHub is the only desktop platform that brings together security, compliance and governance, AI, and enterprise agile planning, enterprises face complexity from all directions in the form of rapidly increasing user expectations, more advanced cyber attacks, and more strict industry regulations.

Let me see only that setups platform that brings together security.

Planes and governance AI enterprise agile planning enterprise.

Enterprises face complexity from all directions in the form of rapidly increasing user expectations more advanced cyber attacks and more strict industry regulations.

Speaker 2: We believe they need GitLab to help them navigate this complexity and realize business value. Our platform improves engineering productivity and reduce the software spent. That's why our customers report seeing seven X faster cycle times with GitLab. Today, I'll discuss how we are driving results in three key areas. First, we're adding new security and governance capabilities in our plan.

We believe they need get lab to help them navigate this complexity and realize business value.

Our platform improves engineering productivity and reduces suffers spent that's why our customers report seeing seven X faster cycle times with good lab today.

Today I will discuss how we are driving results in three key areas first we're adding new security and governance capabilities in our platform.

Speaker 2: Second, we integrated AI throughout the software development life cycle. And third, we added an enterprise adult planning offering to make art platform available to non-technical use.

Second we integrated AI throughout the software development lifecycle and third we added an enterprise agile planning offering to make our platform available to non technical users.

Speaker 2: Let's start with our security and governance functionality. These are at the hearts of our platform. The set is apart from the competition. Organizations like CARF Act, Lockheed Martin, trust GitLab to help them build security and compliance into their workflow.

Let's start with our security and governance functionality. These are at the heart of our platform set us apart from the competition organizations like car facts, Lockheed Martin Trust get lab to help them build security and compliance into their workflows.

Speaker 2: with GitLab, organizations and their engineering teams, reported that they can catch vulnerabilities earlier in the development process. And compliance leaders can set the right controls and governance framework.

With get lap organizations and their engineering teams report that they can catch vulnerabilities earlier in the development process and compliance leaders can set the right controls and governance frameworks.

Speaker 2: In contrast, security point solutions can cause friction for developers. With point solutions, developers either have to wait on security teams to identify vulnerabilities, or if they have access to a security scanner to assess their code, they need to manually copy and paste the scanner results back into their development.

In contrast security point solutions can cause friction for developers.

With point solutions developers either have to wait on security teams to identify vulnerabilities.

Or if they have access to a security scanner to assess their code they need to manually copy and paste the scanner results back into the development tool and.

Speaker 2: The result is code that isn't scanned at the time it's written. This increases the time required to detect and resolve vulnerabilities. Our platform enables organizations to integrate security directly into the developer workflow. A recent product innovation our customers are excited about is our new security findings workflow extension.

The result is code that isn't scanned at the time. It's written this increases the time required to detect and resolve formula abilities. Our platform enables organizations to integrate security directly into the developer workflow.

Our recent product innovation our customers are excited about is our new security findings workflow extension.

Speaker 2: This extension enables developers to see and address their security findings directly in their IDE while they work without breaking their flow.

This extension enables developers to see and address their security findings directly in their ITE wildly work without breaking their flow.

Speaker 2: Our customer see the value of bringing security and compliance into the same platform where developers work. An example is double verify, a leading software platform for digital media measurement, data and analytics. Double verify was previously using GitLab premium alongside several points solutions for the application security needs.

Our customers see the value of bringing security and compliance into the same platform, where developers work and example is double verify a leading software platform for digital media measurement data and analytics double verify was previously using <unk> premium alongside several point solutions for the application security.

Speaker 2: They recently upgraded to GitLab Ultimate to bring security findings closer to their developers. Now their developers can identify, learn about and fix vulnerabilities in the same place where they work without switching applications.

Geraghty needs.

They recently upgraded to give up ultimate to bring security findings closer to their developers.

Now they are the developers can identify learned about fixed vulnerabilities in the same place where to work without switching applications.

Speaker 2: Another key differentiator for us in the security and compliance space is GitLab dedicated. Our single tenant SaaS solution that provides customers with data isolation and residency with GitLab dedicated customers and highly regulated industries to get the benefit of a comprehensive desktop platform while meeting complex and stringent compliance and regulatory requirements.

Another key differentiator for us and the security and compliance space skill of dedicated.

Our single tenant SaaS solution that provides customers with data isolation and residency with get lot of dedicated customers in highly regulated industries to get the benefit of our comprehensive <unk> platform, while meeting complex and stringent compliance and regulatory requirements.

Speaker 2: A large telecommunications company in Asia Pacific recently upgraded to GitLab dedicated to enhance their privacy and compliance capabilities across their software development life cycle.

A large telecommunications company in Asia Pacific recently upgraded to get lab dedicated to enhanced their privacy and compliance capabilities across their software development lifecycle.

Speaker 2: In Q3, we also launched a new self-service portal. Our customers can configure and maintain their good-lav-daticated instances. This product innovation will create a more effective onboarding experience for new customers.

In Q3, we also launched a new self service portal, where customers can configure and maintain their good lab dedicated instances this product innovation will create a more effective onboarding experience for new customers.

Speaker 2: Now I'd like to discuss our second topic, which is our unique approach to AI. We already have 14 AI features available to our customers. That's more than any other DevSecOps platform. We continue to innovate.

Now I'd like to discuss our second topic.

Is our unique approach to AI, we already have 14 AI features available to our customers that's more than any other <unk> platform, we continue to innovate.

Speaker 2: GitLab Duo is our suite of AI-priodevSecOps workflows that enables customers to boost speed and efficiency without sacrificing privacy, security, and compliance. We have three principles in our AI strategy. First, we're the only platform that integrates AI throughout the entire software development life cycle. As developers become more effective, we enable security and operations, team members, keep pace.

You'd love duo is our suite of AI powered <unk> workflows that enables customers to boost speed and efficiency without sacrificing privacy security and compliance we have three principles in our AI strategy first.

Only platform that integrates AI throughout the entire software development lifecycle as developers become more effective we enabled security and operations team members keep pace.

Speaker 2: Also, developers only spend 25% of their time writing code. AI within their stackups should focus on more than just code creation.

Developers only spent 25% of their time riding coat.

Within the Sac ops should focus on more than just code creation.

Speaker 2: Second, we are privacy and transparency first in our approach to AI. Our customers are eager to use AI, but they want to do so responsibly. To support them with this, we do not use their code to train the AI models used by other customers.

Second we have privacy and transparency first and our approach to AI.

Our customers are eager to use AI, but they want to do so responsibly to support them with this we do not use their quota trained AI models used by other customers. Our privacy first approach US who are in more than 50% of the Fortune 100 Trust get lab to secure their intellectual property.

Speaker 2: Our privacy first approach is why more than 50% of the Fortune 100 trust get e

Speaker 2: And third, RAI is powered by a diverse set of models from technology partners, as well as our own AI models. That allows us to select the best AI model for each use case.

Third our AI powered by a diverse set of models from technology partners as well as our own AI models that will allows us to select the best AI model for each use case.

Speaker 2: Incuse 3, we released the beta of KITLAB dual vulnerability summary. This is a cool feature that provides AI generated explanations of security vulnerabilities and suggestions for how to fix them.

In Q3, we released the beta of <unk> dual vulnerability summary. This is a cool feature that provides AI generated explanations of security vulnerabilities and suggestions for how to fix them.

Speaker 2: Another example of our progress, SkitLab Duo Code Suggestions, our AI-powered code creation feature. It will be generally available in our December product release. We have been hearing from our customers that they are seeing efficiency improvements upwards of 50% with code suggestions.

Another example of our progress skilled love duo coach suggestions or AI powered cold creation feature it will be generally available in our December product release, we have been hearing from our customers that they are seeing efficiency improvements upwards of 50% with coach suggestions.

Speaker 2: And finally, we recently announced the beta release of GitLab Duo Chat. With GitLab Duo Chat, users can quickly understand project status, get help with planning and configuration, receive explanations of suggested code, and generate tests.

And finally, we recently announced the beta release of <unk> duo chat weed killer video chat users can quickly understand protect status get help with planning and configuration.

<unk> explanations of suggests that code and generate tests.

Speaker 2: all without compact switching. To start GitLab Chat is available within the GitLab UI, Web IDE and VS Code. We plan to add support for more editors in the future.

All without contact switching to start get let Chet is available within to get lapped UI web <unk> and <unk>, we plan to add support for more edits, which is in the future.

Speaker 2: Our approach to AI is resonating with our customers.

Our approach to AI is resonating with our customers.

Speaker 2: Amado Gramo, Vice President of Infrastructure and DevOps at NASDAQ, recently shared his excitement about how GitLab Duo will help NASDAQ protect their intellectual property and stay in line with regulatory mandates.

For example.

Our motto Grammatico, Vice president of infrastructure and Dev ops at NASDAQ recently shared his excitement about how good love duo will help NASDAQ protect their intellectual property and.

Stay in line with regulatory mandates.

Speaker 2: And presenting at this year's Gardner Application Innovation Summit, Bell Kong at NathWest said, GitLab Duo enables our developers to be more productive, efficient, and successful in creating secure code. We're excited to see the benefits of GitLab's AI features across the entire value chain, and even our most seasoned engineers are seeing value.

And presenting at this year's.

Gartner application innovation Summit Bell Kang at Natwest said get love duo enables our developers to be more productive efficient and successful in creating secure code. We're excited to see the benefits of get labs AI features across the entire value chain and even our most.

Seasoned engineers are seeing value.

Speaker 2: Our next focus area is enterprise agile planning. Our enterprise agile planning offering brings portfolio and project management capabilities into the same platform where engineers work.

Our next focus area enterprise agile planning.

Our enterprise agile planning offering brings portfolio and project management capabilities into the same platform where engineers work.

Speaker 2: Organizations already see our enterprise agile planning capabilities as a strong alternative to establish tools on the market like JIRA. For example, Iron Mountain, the Global Information Management Service Provider, was struggling to manage the plugins required to integrate JIRA with the rest of their development process.

Organizations already see our enterprise agile planning capabilities as a strong alternative to establish tools on the market like <unk>.

For example, Iron Mountain a global information management service provider was struggling to manage the plug ins required to integrate <unk> with the rest of their development process.

Speaker 2: By moving from Gera to GitLab Ultimate, Iron Mountain was able to scale their Agile framework to drive more effective collaboration between enterprise IT teams and KeyStakeholder.

By moving from <unk> to get led Baltimore Iron Mountain was able to scale their agile framework to drive more effective collaboration between enterprise, our it teams and key stakeholders.

Speaker 2: Atlassian's decision to stop support for its server offering is making customers reconsider what product they use for enterprise agile planning.

Atlassian decision to stop support for its server offering is making customers reconsider what product they use for enterprise agile planning.

Speaker 2: We are focused on making it easier for these customers to move to get laps size and self-manage.

We are focused on making it easier for these customers to move to get lab SaaS and self managed we recently launched a new enterprise agile planning SKU now give our ultimate customers can easily bring nontechnical users into the platform.

Speaker 2: We recently launched a new enterprise agile planning skew. Now, GitLab Ultimate customers can easily bring non-technical users into the platform.

Speaker 2: Security and compliance, AI and enterprise agile planning strength and our position as the leader in the desk of platform category. The breadth and depth of our platform across the entire software development life cycle differentiates us from point solutions and our main competitor get up.

Security and compliance AI and enterprise agile planning strengthen our position as the leader in ADESA Gulf's platform category.

And depth of our platform across the entire software development lifecycle differentiate us from point solutions and our main competitor Github.

Speaker 2: Let me give a few examples of why enterprises choose GitLab.

Let me give a few examples of why enterprises choose get lab.

Speaker 2: First is a leading global financial platform that tried to integrate GitHub with several other DevOps tools.

First is a leading global financial platform.

Hi to integrate Github with several other Dev ops tools.

Speaker 2: It's created complex workflows that require time consuming maintenance.

This created a complex workflows that require a time consuming maintenance.

Speaker 2: Now the customer is moving their coat repository and CI from GitHub to GitLab. And GitLab was able to replace other point solutions for automation, continuous delivery and package management as well. With GitLab, the customer is able to reduce costs and centralize their work on a single platform with eight times faster deployments and four times faster feature delivery.

Now the customer is moving their code repository NCI from gate to get lab, and <unk> was able to replace other point solutions for automation continuous delivery and packaged management as well with good lab, the customer is able to reduce costs and centralize their work on a single platform with eight times faster deployments.

<unk> four times faster feature delivery.

Speaker 2: Another example is a business networking organization that initially build its software development workflows around GitHub.

Another example is a business networking organization that initially build a software development workflows around Github.

Speaker 2: They began hitting usage limits when running builds and quickly realized that GitHub was not efficient enough to support their growth.

They began hitting usage limits when running built so quickly realize that github was not efficient enough to support their growth.

Speaker 2: They switched to GitLab premium as far as seven x-increase in the number of pipelines run. They also needed a comprehensive security and compliance solution that GitHub was unable to provide. As a result, the company upgraded to GitLab Ultimate this year to help them build a major new product to serve their rapidly grown customer base.

The switch to get lot premium and saw a <unk> increase in the number of pipelines from you also needed a comprehensive security and compliance solution that get help us enable to provide as a result, the company upgraded to get lap ultimate this year to help them build a major new products to serve their rapidly growing customer base.

Speaker 2: We believe that enterprises, keep more than a developer platform. They need a full desk of platform that skills and streamlined software development workflows while ensuring robust security and compliance. And this was a full display at our desk of world tour.

We believe that enterprises need more than a developer platform. They need a full <unk> setups platform that scales and streamline software development workflows, while ensuring robust security and compliance and this was on full display at our desktops World Tour. We recently rounded out this year's 11 stop World Tour, where the.

Speaker 2: We recently rounded out this year's 11th stop world tour with a finally event in Washington, DC. And each event included a fireside chat for customers like Kata Ford, Deutsche Telekom, Southwest Airlines and Splunk shared how they rely on GitLab to improve security, drive efficiency, and accelerate time to market.

Finally event in Washington, DC and each event included a fireside chat where customers like Ford Deutsche Telekom Southwest Airlines and Splunk shared how they rely on get lab to improve security drive efficiency and accelerate time to market.

Speaker 2: We created the DevOps platform category. And we continued to set the standard. We remained focused on helping enterprises.

We created the Dev ops platform category and we continue to set the standard we remain focused on helping enterprises.

Speaker 2: build fast and stay secure with tools that teams love to use. We are well positioned to win the estimated $40 billion market opportunity in front of us. I'd like to thank all of our customers, as well as our partners, our team members, community members and investors for their continued support. Now we'll now turn it over to Brian Robbins, GitLab's G Financial Officers.

Build fast and stay secure with tools that teams love to use we are well positioned to win the estimated $40 billion market opportunity in front of us I'd like to thank all of our customers as well as our partners are key members community members and investors for their continued support and I will now turn it over to Brian Robbins.

<unk> Chief Financial Officer.

Speaker 3: Thank you, Sid, and thank you again for everyone joining us today.

Thank you Susan and thank you again for everyone joining us today.

Speaker 3: Overall, we saw strong performance in the third quarter. Our revenue grew 32% year-to-year, and we delivered over 2200 basis points of non-GAP operating margin expansion. I'm pleased to share our first quarter of non-GAP operating profit. This is a major milestone for us, and efficiently scaling the business to address our large market opportunity. At the same time, we continue to make target investments in key product areas. These include security and governance, AI, and enterprise agile planning.

Overall, we saw strong performance in the third quarter, our revenue grew 32% year over year, and we delivered over 2200 basis points of non-GAAP operating margin expansion.

I am pleased to share our first quarter of non-GAAP operating profit. This is a major milestone for us and efficiently scaling the business to address our large market opportunity.

At the same time, we continue to make targeted investments in key product areas. These include security and governance, AI and enterprise agile planning.

Speaker 3: Looking back at the quarter, I want to share some of the areas we have been closely monitoring. These include sales cycles, win rates, contraction, and ultimate.

Looking back at the quarter I want to share some of the areas. We have been closely monitoring. These include sales cycles when rates contraction and ultimate.

Speaker 3: In comparing Q3 with Q2 of FY24, we've seen overall sales cycle of lengthen. During Q3, by behavior in our enterprise segments stabilized, however in the mid market in SMB, we see customers continue to be cautious in the uncertain macro environment.

And comparing Q3 with Q2 of FY 'twenty four we have seen overall sales cycles lengthen during Q3 buying behavior in our enterprise segment stabilize however in the mid market and SMB, we see customers continue to be cautious and uncertain macro environment.

Speaker 3: We have adopted our go-to-market approach in this environment to deliver predictable and strong results.

We have adopted our go to market approach in this environment to deliver predictable and strong results.

Speaker 3: In Q3, our win rates have improved, signaling that the value proposition of the death stock ops platform is resonating in the market.

In Q3, our win rates have improved signaling that the value proposition of the desktops platform is resonating in the market.

Speaker 3: contraction during Q3 also improved for the third consecutive quarter, and is in line with levels from Q3 last year.

Contraction during Q3 also improved for the third consecutive quarter and is in line with levels from Q3 last year.

Speaker 3: And finally, we continue to see strong adoption of ultimate, our top tier. Ultimate represents over 50% of Q3 ARR bookings driven by customer wins for security and compliance use cases.

And finally, we continue to see strong adoption of ultimate are top tier ultimate represents over 50% of Q3 our bookings.

Bookings driven by customer wins for security and compliance use cases.

Speaker 3: Revenue of 149.7 million, this quarter represents an increase of 32% organically from Q3 of the prior year. We ended Q3 with over 8100 customers with ARR of at least 5,000 compared to over 7800 customers in the second quarter of FY24.

Now I'll turn into the numbers.

Revenue of $149 7 million this quarter represents a increase of 32% organically from Q3 of the prior year.

We ended Q3 with over 81 under customers with IRR of at least 5000 compared to over 7800 customers in the second quarter of FY 'twenty for.

Speaker 3: This compares over 64 and customers in Q3 of the prior year. This represents a year-to-year growth rate of approximately 26%. Currently customers with greater than 5,000 and AR represent approximately 95% of our total AR. We also measure the performance.

This compares to over 6400 customers in Q3 of the prior year.

This represents a year over year growth rate of approximately 26%.

Currently customers with greater than 5000, <unk> represent approximately 95% of our total <unk>.

We also measure the performance and growth of our larger customers.

Speaker 3: Who we define as those spending more than 100,000 ARR with us?

We define as those spending more than 100000.

Speaker 3: At the end of third quarter of FY 24, we had eight hundred and 74 customers with ARR of at least 100,000 compared to eight hundred and 10 customers in Q2 of FY 24. This compares to 638 customers in a third quarter of FY 23.

With us.

At the end of the third quarter of FY 'twenty four we had 874 customers with <unk> of at least 100000.

Compared to 810 customers in Q2 of FY 'twenty four.

This compares to 638 customers in the third quarter of FY2023.

Speaker 3: This represents a year-old growth rate of approximately 37%.

This represents a year over year growth rate of approximately 37%.

Speaker 3: As many you know, we don't believe pathway buildings be a good indicator of our business, given that prior peer comparisons can be impacted by a number of factors. Most notably, our history of large prepaid multi-year deals.

As many of you know, we don't believe calculated billings to be a good indicator of our business given that prior period comparisons can be impacted by a number of factors most notably our history of large prepaid multi year deals.

Speaker 3: This quarter total RPO grew 40% year-to-548.1 million. CRPO grew 34% to 371.8 million for the same timeframe.

This quarter total ARPA grew 40% year over year to $548 1 million.

<unk> grew 34% to $371 8 million for the same timeframe.

Speaker 3: We ended our third quarter with a dollar base net retentuated of 128%.

We ended our third quarter with a one dollar based net retention rate of 128%.

Speaker 3: As a reminder, this is a trailing 12 month metric that compares the expansion activity customers over the last 12 months with the same cohort of customers during the prior 12 month period. This quarter, we've updated our dollar-based net retention rate calculation methodology to reflect operational changes to our customer account hierarchies. The trend of declining but stabilized rate has been consistent based on both the previous and the new dollar-based net retention rate calculation.

As a reminder, this is a trailing 12 month metric that compares the expanse activity of customers over the last 12 months with the same cohort of customers during the prior 12 month period.

This quarter, we have updated our dollar based net retention rate calculation methodology to reflect the operational changes to our customer account hierarchies.

<unk> of declining but stabilized rent has been consistent based on both the previous and the new dollar based net retention rate calculations.

Speaker 3: Non-GAP rows margin were 91% for the quarter, which is consistent with the proceeding quarter. This is slightly improved from third quarter.

non-GAAP gross margin were 91% for the quarter, which is consistent with the preceding quarter.

This is slightly improved from third quarter of FY2023.

Speaker 3: SAS represents over 25% total revenue and grew 53% year-to-year. We have been able to maintain best-in-class non-gap gross margins despite the higher cost of SAS delivery. This is another example how we continue to drive efficiencies in the business.

SaaS represents over 25% of total revenue and grew 53% year over year.

We have been able to maintain best in class non-GAAP gross margins, despite the higher cost of sales delivery.

This is another example, how we continue to drive efficiencies in the business.

Speaker 3: We saw improved operating leverage this quarter, largely driven by realizing greater efficiencies as we continue to scale the business.

We saw improved operating leverage this quarter, largely driven by realizing greater efficiencies as we continue to scale. The business Q3, non-GAAP operating profit was $4 7 million or 3% of revenue compared to a loss of $21 6 million or negative 19% of revenue in the third quarter of last year. This.

Speaker 3: Q3-9 gap operating profit was $4.7 million or $3% of revenue, compared to a loss of $21.6 million or negative 19% of revenue in the third quarter of last year. This includes an offering a loss of $2.6 million for G-HOOB, RJV and Majority Institute of the Area. On a Sanloom GitLab basis, Q3-9 gap operating income was $7.3 million or $5% of revenue.

This includes an operating loss of $2 6 million for <unk>, our JV in majority on subsidiary on a stand alone get lab basis, Q3, non-GAAP operating income was $7 3 million or 5% of revenue.

Speaker 3: Operating cash used to 6 million a third quarter of FY24 compared to 1.2 million use of cash and operating activities in the same quarter of last year.

Operating cash use of $6 million in third quarter of FY 'twenty four compared to $1 2 million use of cash in operating activities in the same quarter of last year.

Speaker 3: Since FY23, we have been proactively negotiating a bilateral advanced pricing agreement or APA relating to the transfer pricing arrangements between the Netherlands and the US tax authorities. The proposed agreements between the company, the IRS and the Dutch tax are not yet final. However, given the stage of discussions during the third quarter, we recorded an estimate of 254 million non-recuring income tax adjustment. The adjustment does not impact our non-gap earnings per share.

Since FY2023 we have been proactively negotiating a bilateral advanced pricing agreement or API relating to the transfer pricing arrangements between the Netherlands, and the U S tax authorities.

Proposed agreements between the company the IRS and the Dutch sacs are not yet final.

However, given the stage of discussions during the third quarter, we recorded an estimate of $254 million nonrecurring income tax adjustment the adjustment does not impact our non-GAAP earnings per share.

Speaker 3: I believe this team positions GitLab for the future by optimizing our long-term tax position. The APA will result in an exit cast tax payment to the Dutch tax authority in the future. The timing is dependent on ongoing work with both parties and we will keep you updated on future earnings calls. Our modeling shows exit payment should be recouped as tax savings over future periods.

I believe this team positions get lab for the future by optimizing our long term tax position.

Hey will result in the exit cash tax payment to the Dutch tax authority in the future. The timing is dependent on ongoing work with both parties and we will keep you updated on future earnings calls our modeling shows exit payments should be recouped as tax savings over future periods.

Speaker 3: Now let's turn to guidance. We are assuming that the trends in the business we have seen over the last three quarters continue.

Now, let's turn to guidance, we are assuming that the trends in the business. We have seen over the last few quarters continue.

Speaker 3: For fourth quarter of FY 24, we expect total revenue of 157 million to 158 million, representing a growth rate of 28% to 29% year-to-year. We expect a non-gap operating, come of 5 million to 6 million. And we expect a non-gap income per share of 8.9 cents, assuming 164 million weighted average of diluted shares outstanding.

For fourth quarter of FY 'twenty four we expect total revenue of $157 million to $158 million, representing a growth rate of 28% to 29% year over year we.

We expect a non-GAAP operating income of 5 million to $6 million.

And we expect a non-GAAP net income per share of <unk> <unk>, assuming 164 million weighted average diluted shares outstanding.

Speaker 3: For the full year FY 24, we now expect total revenue 573 million to 574 million, representing a growth rate of approximately 35% year-rear. We expect non-gap operating loss of 10 million to 9 million. And we expect non-gap net income per share of 12 cents to 13 cents, assuming 162 million weighted average saluted shares outstanding.

For the full year FY 'twenty four we now expect total revenue of 573 million to $574 million, representing a growth rate of approximately 35% year over year.

We expect non-GAAP operating loss of 10 million to $9 million and we expect non-GAAP net income per share of <unk> 12 to 13.

Assuming a 162 million weighted average diluted shares outstanding.

Speaker 3: Point of percentage basis are new annual FY 24 guidance implies non-GAP operating improvement of approximately 1900 basis points year-rear at the midpoint of our guidance.

On a percentage basis, our new annual FY 'twenty for guidance implies non-GAAP operating improvement of approximately 9800 basis points year over year at the midpoint of our guidance. We believe that our continued focus on responsible growth will yield further improvements in our unit economics I am pleased to guide to a profitable non-GAAP operating income and.

Speaker 3: We believe that our continued focus on responsible growth will yield further improvements in our unit economic.

Speaker 3: I'm pleased to guide to a profitable non-gap operating income in 4Q. We remain on track to achieve free cash-ill-break even for FY 25, excluding any non-returring cash-tracks damage related to the APA result I discussed earlier.

<unk>, we remain on track to achieve free cash flow breakeven for FY 'twenty five excluding any nonrecurring cash tax payments related to the API result, I discussed earlier.

Speaker 3: There are a number of drivers we believe will fuel our business and FY 25 beyond.

There are a number of drivers we believe will fuel our business in FY 'twenty five and beyond.

Speaker 3: At our core, continuing to deliver customer value with our DevSecOps platform aligns our success with our customer success. Additionally, in April this year, we raised the price of our premium tier for the first time in five years.

At our core continuing to deliver customer value with our Dev ops platform aligns our success with our customer success. Additionally in April this year, we raised the price of our premium tier for the first time in five years thus.

Speaker 3: Thus far, customer behavior has been in line with our expectations.

Thus far our customer behavior has been in line with our expectations. Although as a reminder, we anticipate the real financial impact from this change through FY 'twenty six.

Speaker 3: Although as a reminder, we anticipate the real financial impact from this change through FY26.

Speaker 3: Another driver's launch of dedicated. GitLab dedicated allows us to serve companies and highly regulated industries with complex security and compliance requirements. The largest deal we signed in Q3 was an eight figure at PCV expansion with an auto company on dedicated.

Another driver is the launch of dedicated get lab dedicated allows us to serve companies in highly regulated industries with complex security and compliance requirements. The largest deal. We signed in Q3 was an eight figure <unk> expansion with an auto company on dedicated.

Speaker 3: The final driver for FY 25 beyond is the monetization of our AI capabilities. Last month, we announced the general availability of GitLab Duo Code Suggestions is expected in our December product release.

The final driver for FY 'twenty five beyond as the monetization of our AI capabilities.

Last month, we announced the general availability of get lab dual code suggestions as expected in our December product release.

Speaker 3: Separately, I'd like to provide an update on Jehu, our Chinese joint venture. Our goal remains to deconsolidate Jehu. However, we cannot predict the likelihood of timing of when this may potentially occur. Thus, for modeling purposes for FY24, we now forecast approximately 22 million of expenses related to Jehu compared to 19 million FY23.

Separately I'd like to provide an update on <unk>, our China joint venture our goal remains to the consolidated <unk>. However, we cannot predict the likelihood or timing of when this may potentially occur thus for modeling purposes for FY 'twenty four we now forecast approximately $22 million of expenses related to <unk> compared to $19 million in FY <unk>.

Speaker 3: Excluding the impact of Yehu, we anticipate GitLab will be non-GAP operating income break even in FY24. In closing, I'm pleased with our business momentum driven by our market leading platform approach and commitment to capturing our large market opportunity. Chris, our new CRO has led consistent execution with our fail-seam and partners to drive a strong quarter.

<unk> three <unk> excluding.

Excluding the impact of <unk>, we anticipate get lab will be non-GAAP operating income breakeven in FY 'twenty four in closing I am pleased with our business momentum driven by our market leading platform approach and commitment to capturing a large market opportunity, Chris our new zero as consistent execution with our sales team and partners to drive a strong quarter.

Looking forward, we continue to prioritize driving revenue growth in a responsible manner.

With that we'll now move to Q&A to ask a question. Please use the chat feature and post your question directly to IR questions. We're ready for the first question.

Speaker 1: In the essence of time, we do request everyone to limit themselves to one question. And our first question comes from Koji with Bank of America.

And the essence of time, we do request everyone to limit themselves to one question and our first question comes from Koji with Bank of America.

Hey, guys. Thanks for taking the question.

A couple of times in the prepared remarks, you guys mentioned enterprise agile planning.

I thought that was pretty interesting that you guys are highlighting that so so curious to hear what you believe the opportunity is there is this a big replacement opportunity how do we think about that I believe it's included in the pricing model I just want to make sure we understand the opportunity here on the planning side. Thank you.

Yes. Thanks for the question, we're really thrilled about this market opportunity with enterprise agile planning, we bring portfolio and project management capabilities into that same platform way to.

Speaker 2: engineers work and it is included in our ultimate pricing today. But we introduced a new SKU where we can reach a different non-engineering audience, people who will use the enterprise agile planning, but not the desk, second ops features.

Engineers work and it is included in R. R.

Our ultimate pricing today, but we introduced a new SKU, where we can reach in different non engineering audience people, who will use to enterprise agile planning, but note that das second ops features.

Speaker 2: And we've shown that we can migrate thousands of these planning users successfully. I want to know that it's still very early days for this. So our guidance includes the limited anticipated impact for Q4. This is a long term strategy that will take some time to come to fruition. The biggest impact is not expected in the coming fiscal years, in the coming fiscal year, but in the years after.

And we've shown that we can migrate thousands of these planning users successfully I want to note. It's still very early days for this so our guidance includes the limited anticipated impact for Q4 and this is a long term strategy that will take some time to come to fruition. The biggest impact is not expected in the coming fiscal year.

In the coming fiscal year, but in the years after.

Thank you.

Up next we have Karl with UBS.

Speaker 2: Congratulations on the results. And I'll post this question to you.

Great.

Congratulations on the results of close this question to you.

Speaker 4: One of the interesting things I thought you said on the last earnings call was that you suggested that we might be at the very beginning of a displacement cycle for at Lassie and Jira and you called out a large bank that was in fact beginning to do that. With the passage of another three months, did you mind updating us on that? Is there any further evidence that's giving you conviction that that's in fact starting to happen? Any other anecdotes or metrics you could share?

One of the interesting things I thought you said on the line.

Last earnings call was that you suggested that we might be at the very beginning of the <unk>.

Displacement cycle for Atlassian, Jarrett and you called out a large bank that was in fact, beginning to do that with the passage of another three months did you mind updating us on that is there any further evidenced that's giving you conviction that thats in fact, starting to happen any other anecdotes or metrics you could share.

Speaker 2: Yeah, thanks for asking. We're very pleased with our pipeline for this, for an enterprise agile planning in this new skew we have. And it's being helped by Atlassians end up support for their server product.

Yes, thanks for asking we're very pleased with our pipeline for this for.

For an enterprise that you are planning in this new SKU, we have and its being helped by Atlassian end of support for their server product.

Speaker 5: because of that being deprecated, a lot of customers are taking stock of where they're at. And they're not even always moving to get left self-managed. Sometimes they move to get left sass, but it is a time, a natural point for them to evaluate and a CD advantage of bringing together their planning users with their engineer security people, operations people, that tied their doors work together, the faster the cycle time. Thank you. Thank you.

Because of that being deprecated a lot of customers are taking stock of where they're at and they're not even always moving to get lapped self managed sometimes they move to get lapped SaaS, but it is a time of natural point for them to evaluate and ACD advantage of bringing together theyre planning users with their engineers security people opt.

Patients people that tighter dose where together the faster cycle time.

Okay. Thank you.

Thank you.

Our next question comes from Mike at Needham.

Speaker 6: Hey guys, thanks for taking the question here. I did just want to double check. So first piece, they're Brian , appreciate the updated sounds like the premium price queue increases tracking in line with expectations. Just wanted to see if there was any more color you could, you could parse out there. And if that in any way, or your assumptions for that premium price queue is.

Hey, guys. Thanks for taking the question here.

I did just want to double check so first piece there Brian appreciate the update it sounds like the premium price SKU increase is tracking in line with expectations. Just wanted to see if there was any more color you could you could parse out there and if that in any way or in your assumptions for that premium price skus.

Speaker 6: has changed when we think about that Q4 guidance. You guys are putting out there today. Would you like to tackle that first? Thank you.

As change when we think about the Q4 guidance that you guys are putting out there today.

We'd just like to tackle that first thank you.

Speaker 3: Yeah, thanks Mike. You know, we're happy with the performance of the premium price queue. It's in line with what we modeled. You know, one of the things that we've noted is first orders, especially in SMB and mid market are lower than expected. And you'll see some of that in the base customers of greater than 5K. But overall, we're happy with the premium price impact and it's in line with our expectation.

Yes, Thanks, Mike.

Happy with the performance of the premium price SKU.

It's in line with what we modeled one of the things that we've noted is first orders, especially in SMB and mid market are lower than expected and youll see some of that in the base customers of greater than five K, but overall, we're happy with the premium price impact and it's in line with our expectations.

Speaker 6: Thanks for that. And on the SMB and Mid-Morca as well, is there any way you could help us think about, I think you cited that with the elongated deals like those we saw on a sequential basis. So, can you help us think about what is the company's revenue exposure to those SMB and Mid-Morca customers as well as when that elongation did start to show itself? And I'll leave it there. Thank you guys.

<unk>.

Thanks for that and on the SMB and mid market as well is there any way you could help us think about I think you cited that with the elongated deal cycles, we saw on a sequential basis. So.

Can you help us think about what is the company's revenue exposure to those SMB and mid market customers as well as when that elongation did start to show itself and I'll leave it there. Thank you guys.

Speaker 7: Yeah, we've, you know, the enterprise percentage of the total has remained pretty consistent. It's around 60% of the total base. And then popsec is lower than 10%. So SMB and min market makes up the remainder. Thank you.

Yes.

The enterprise percentage of the total has remained pretty consistent that's around 60% of the total base and then pub SEC is little over 10%, So SMB and mid market makes up the remainder.

Thank you.

We will now hear from Ryan at Barclays.

Yeah.

Speaker 8: One for Brian and one for Sid. Brian , great to see the strong improvement in net retention. Just for mowing purposes, what was the benefit to the net retention number from the premium price increase? And for Sid, we're just wondering when it comes to the new capabilities and interest from your customers around gender of AI, has that shifted at all their calculus between choosing between like self-hosted or the cloud? Just let the CEO to maybe help think about that decision. entrepreneur

Hey, guys. Thanks for your question.

One for Brian.

Brian Great to see the strong improvement in net retention just.

Just for modeling purposes, what was the benefit so the net retention number from premier price increase and pursuit of but just wondering when it comes to the new capabilities of interest from your customers around generative AI has that shifted at all their calculus between choosing between like self hosted or the cloud just love to see it.

How are you thinking about that.

Speaker 3: I'll take the dollar-based net retention first. And so you'll want to call out, we've made a change in the way that we've calculated dollar-based net retention rate this quarter to better reflect.

Yeah, I'll take the dollar based net retention first and so.

You wanted to call out we've made a change in the way that we've calculated dollar based net retention rate this quarter to better reflect the business itself and so.

Speaker 3: the business itself. And so this quarter, if you did the old way, be flat, 124 to 124. But the new way basically takes into the account hierarchies, the old way that we did it actually kept the static view of the parent account.

This quarter, if you did the old way be flat 124 to $1 24.

But the new way basically takes into account the account hierarchies.

The old way that we did it actually kept a static view of the parent accounts and if there is a merger of new subsidiary division being shut down or something they actually showed a churn and then a new business and so the change that we made it's important to note doesn't change the business at all it just shifts between growth in new to give.

Speaker 3: And if there was a merger, a new subsidiary, division being shut down or something, that actually showed a...

Speaker 3: turn and then a new business. And so the change that we made, it's important to note, doesn't change the business at all. It just shifts between growth and new to give a better reflection of what's going on in the business. This is reflected in our Tainq for Q1 and Q2. And so you can see the disclosures there, but under the old method was 124 to 124. And it's under the new method, it's 128. Okay.

Better.

Reflection of what's going on in the business. This is reflected in our 10-Q for Q1 and Q2 and so you can see the disclosures there, but under the old method was 124 to $1 24, and it's under the new method, it's $1 28.

Speaker 2: Thanks. Regarding AI and SAS versus self-managed, you're able to do SAS and AI self-managed with AI on SAS. And we also plan to have some of the AI features available purely self-managed. The way to keep, like the most things, will ship SAS first only, then come to self-managed using SAS for AI and then code to self-managed if they go there at all.

So over to you.

Thanks.

Regarding AI and SaaS versus self managed youre able to do SaaS Nai self managed with the AI on SaaS and we also plan to have some of the AI features available purely self managed.

The way to keep.

Most things will ship SaaS first only Dan come to self manage using SaaS for AI and <unk> self managed if they go there at all.

Speaker 2: What we are very positive about is our dedicated offering because it combines the convenience of SAS and then having a single-tenant installation with the increased security posture that comes with that. I think that's going to be a great solve. But we want to make sure that in the interim, our self-managed customers can use the AI features on SAS, even if they keep having their self-managed installation. So that's a priority for us.

What we are very positive about is our dedicated offering because it combines.

The convenience of SaaS, and then having a single tenant installation with increased security posture that comes with that I think that's going to be a great source, but we want to make sure that.

In the interim our self managed customers can use the AI features on SaaS, even if they they keep having their self managed installations. So that's that's a priority for us.

Speaker 8: Yeah, we've had a really good feedback on give that dedicated Brian just real quick on that one twenty eight Under the new method. What was the net retention the prior quarter and Just if you could parse out being what the contribution was on the price increase or like a general range That'd be helpful just from that revenge side. Thank you

Yes, we felt really good feedback good luck dedicated Brian just real quick on that 128 under the new method what was the net retention the prior quarter and just if you could parse out what the contribution was from the price increase.

General range that would be helpful.

Speaker 3: Yes, the, they'll be in our queue. We'll follow it later today. It's, it was roughly about the same flat quarter quarter. And, you know, we don't break out the difference. Well, I guess from a price increase perspective, we don't break that out in particular, but one of the things I talk about is in the net dollar retention rate.

Yes.

There'll be in our Q will follow up later today.

It was roughly about the same flat quarter over quarter and.

We don't break out the difference while I guess from a price increase perspective, we don't break that out in particular, but one of the things I talked about is in the net dollar retention rates what the percentage was between seat change price change in tier change here.

Speaker 8: what the percentage was between seat change, price change and peer change. Historically, seat change has been roughly about 50%. Price change and peer change have been 25%. Because of the price increase, the price change now makes up roughly about a third of the total of the net dollar retention rate. The seat change is a little less than 50%. And then the peer change is a little less than 25%. Thank you guys. Thank you.

Historically C change has been roughly about 50% price change into your change of 25% because of the price increase the price change now makes up roughly about a third of the total of the net dollar retention rates the seat changes a little less than 50% and then the tier changes a little less than 25%.

Excellent. Thank you guys.

Thank you.

We will now hear from cash with Goldman Sachs.

Speaker 9: Hey, thank you very much. Happy holidays, great to see the results. A question for you. It looks like the tone, your tone and confidence level and conviction level in going after the competitive opportunity with Atlesian and Microsoft is actually stronger than before. I'm curious, what gives you the conviction to pursue that competitiveness?

Thank you very much happy holidays, great to see the results of the same question for you it.

It looks like the tone, your tone and confidence level and conviction level and going after the.

The competitive opportunity with with Atlassian and Microsoft is actually stronger than before I'm curious.

What gives you the conviction to pursue that that.

Speaker 9: And what are things that the GitLab has to do from my product perspective and I go to market perspective to be able to take advantage of what you consider to be these nascent opportunities? And second and final, the one waiting for Google to more closely align or for you to closely align your gender way of efforts with Google. How close are we from a full-blown integration and announcement of sorts? Thank you so much.

Competitiveness and water things that get lab has to do from a product perspective, and a go to market perspective to be able to take advantage of what you consider to be these nascent opportunities in the second and final.

We've been waiting for Google to more closely align or for you to closely align your narrative generative AI efforts with global health close or how far are we from a full blown integration at announcement of <unk>. Thank you so much.

Speaker 2: Thanks, Cash. Yeah, the customer feedback on our AI functionality has been positive and as you might have heard in the prepared remarks, customers like NATS West and NACDEC are using it in their engineering teams and seeing the value and the productivity and efficiency that it brings. Our customers have reported efficiency improvements upward to 50% with code suggestions.

Thanks Kash.

Feedback on our AI functionality has been positive and as you might have heard in the prepared remarks customers like <unk> and NASDAQ are using it in their engineering teams and seeing the value and the productivity and efficiency that it brings our customers have reported efficiency improvements upwards of 50% with coach suggestions.

Speaker 2: We recently spoke with a leading international travel agency and they said that the features

We recently spoke with a leading international travel agency and they said that their features.

Speaker 5: They test it. They believe that GitLab offers a better quality there. We also spoke with a multinational financial technology company and their team is excited about using GitLab Duo for generating configurations, test generation, book finding, and automating operational work. So we're very excited that we have a broad platform so that we can do AI across the lifecycle with 14 features for customers available today. So we're very excited that we can do AI across the lifecycle with a better quality.

They tested they believed that get lab office, a better quality dairy and you also spoke with a multinational financial technology company and their team is excited about using <unk> for generating configurations test generation book, finding and automating operational work. So we're very excited that we have a broad platform so that we.

Can do AI across the lifecycle with 14 features for customers available today.

You're on mute.

Speaker 9: Sorry, the other question, the competitiveness against athletes and Microsoft, what are the things you have to do from a product and go to market perspective to really take advantage of the opportunity that you see the replacement option.

Sorry.

Another question the competitiveness against our Appalachian and Microsoft one of the things you have to do from a product and go to market perspective.

Really take advantage of the opportunity that you see.

The replacement opportunity.

Speaker 5: Yeah, I think, apart from AI, I think it's really unique to get lab to have better security and compliance.

Yes, I think apart from AI I think its really unique to get lapped to have better security and compliance are features like SaaS and dashed container scanning API security compliance management are unique to get land. We also talked about the planning and management features we.

Speaker 5: Our features like SaaS, and DAS, container scanning API security compliance management are unique to GitLab. We also talked about the planning and management features. We talked about enterprise agile planning, but also think of value stream management and door on metrics that are all unique to GitLab as a DevOps platform. And for example, we had a QC deal with a European telecom. We partnered there with AWS and we won against GitHub.

<unk> talked about in enterprise AGL planning, but also think of value stream management and door on metrics that are all unique to get lab as a Dev ops platform and for example, we had a Q3 deal at a European Telecom, we partnered there with AWS and we won against Github.

Speaker 10: Thank you so much. Happy holidays. You too. Nick.

Thank you so much happy holidays.

<unk>.

Nick with Scotia Bank is next.

Speaker 4: Awesome. I think, guys, I wanted to build on Ryan's question just around the gender and the AI functionality with GitLab Duo. It sounds like there's not gonna be really any difference in feature functionality and sort of folding in some of the new enhancements.

Okay.

Awesome. Thanks, guys.

I wanted to build on Ryan's question, just around regenerative AI functionality with lab duo for.

It sounds like there's not going to be really any different from feature functionality and sort of folding in some of the new enhancements into.

Speaker 4: SAS and self-managed, but I wanted to ask how you guys think about layering additional feature functionality to premium versus ultimate and whether there's kind of any difference there and then

Josh.

<unk> managed by warmer I wanted to ask how you guys think about.

Layering additional feature functionality in the premium versus the ultimate and one of the economy kind of any difference there and then just as a follow up to that as you sort of layer and more functionality to that ultimate skew more broadly how do you think about pricing.

Speaker 4: So, the following for that is you sort of layer in more functionality into that ultimate skew more broadly. How do you think about pricing? Thanks.

Speaker 5: Our code suggestions, I think is very comparable to a market that I think what's unique about GetLab is having 14 AI features in the platform available to customers today. I think that's a big differentiation. As far as how do we sell it, some features will be a different skew. For example, code suggestions, and that's then available not just to ultimate and premium, but also free customers.

Yes.

Our coach guests since I think it's very comparable to a market that I think what's unique about <unk>, having 14 AI features in the platform available to customers today I think thats it.

Big differentiation as for how do we sell it some features will be a different SKU.

For example coach suggestions and Thats been available not just to ultimate in premium, but also free customers.

Speaker 5: might be not paying for GitLab today. I think that's an exciting opportunity, especially over the long term. And then some of the features we're gonna put into ultimate or premium, and there might even be extra excuse we introduced in the future.

Might be not paying forget lab today, I think that's an exciting opportunity, especially over the long term and then some of the features we're going to put into ultimate or premium.

There might even be extra skus, we introduce in the future.

Okay.

Michael with Keybanc is next.

Speaker 11: Everybody believed in it? Huh, so they were all told

Hey, everybody good evening.

Hi, Brian since antibody.

Speaker 11: So given some outweekness you did call out in SMB from Phil Cycle on the Size perspective, can you say a little bit more specific about what really drove the upside in the quarter? You see a call on enterprise and or public and how that might be related to some of the things we've seen more broadly this quarter with cloud optimizations seeming to stabilize and some of the cloud consumption model companies seem to do better.

So given some of that weakness you did call out an SMB from sales cycle and size perspective can you just be a little bit more specific about what really drove the upside in the quarter.

Got it on enterprise and Republic, and how that might be related to some of the things we've seen more broadly this quarter with cloud optimizations seeming to stabilize some of the cloud consumption model companies seem to do better.

Speaker 5: Yeah, if you look at cloud consumption, it's an increasing part of our business, but it's currently a relatively small part of our business. So we aren't materially affected by the cloud consumption stabilizing.

Yeah. If you if you look at cloud consumption, it's an increasing part of our business, but it's currently a relatively small part of our business. So we arent materially affected by the cloud consumption stabilizing.

Speaker 11: Right, I guess I meant more for the general demand perspective. In other words, people are using more cloud, is that driving more need, demand, or get labs, descriptions, seats, et cetera. And again, what's really offsetting at SMB weakness to drove the upside in the corner.

Brian I guess I meant more for the general demand perspective in other words people are using more cloud is that driving more need demand.

Our get labs subscription seats et cetera, and again, what's really offsetting that SMB weakness that drove the upside in the quarter.

Speaker 5: With Giltman, it has the biggest benefit the more complex your organization is. The more complex your security and governance, the more...

I think that.

With get lab.

It has the biggest benefit the more complex. Your organization is so the more complex your security and governance to more.

Speaker 5: heterogeneity in your projects where you go from kind of having projects on mainframe to the latest ad job. That is where we can really shine by bringing that all together in one platform. We typically see a seven X acceleration of cycle time. So.

Hetro <unk> in your projects, where you go from kind of having protects our mainframe to the latest agile database, where we can really shine by bringing that all together in one platform. We typically see typically see a seven X acceleration of cycle time so.

Speaker 5: give us the hardest problems. That's where we shine. And the enterprises are having the hardest time of kind of having to move really fast, having all that.

Give us give us the hardest problems, that's where we shine and the enterprises are having the hardest time of kind of having to move really fast have an OLED.

Speaker 5: All these things they have to move at the same time, but having the most compliance and security questions to do. We do believe if you look at the overall market, software is just gonna keep getting more complex. Now you get AI now, you'll have more regulatory friction coming for everyone. So that gives us a lot of optimism about the future. Thank you.

All these things they have to move at the same time, but having the.

Most compliance and security question as to do we do believe if you look at the overall market software is just going to keep getting more complex and you get AI now we'll have more regulatory.

Friction coming for everyone. So that gives us a lot of optimism about the future.

Thanks, Ed.

Thanks, Michael.

Ethan with Piper Sandler.

Speaker 10: Great, thanks for taking my question. Kind of filling in here for Rob this afternoon. I just wanted to kind of talk about kind of on the same topic of cloud optimizations and other things. Kind of come to a maybe start slow down. How are companies thinking about ramping the velocity of a new development projects, especially as we head into 2024? I just would be curious to hear if how you customer conversations have been trending on that topic. Thank you.

Great. Thanks for taking my question and kind of filling in here for Rob. This afternoon I just wanted to kind of talk about kind of on the same topic of cloud optimizations and I was just kind of come to maybe start to slow down how our companies thinking about ramping the velocity of new development projects, especially as we head into 2024 I'd just be curious to hear if how are you.

Customer conversations have been trending on that topic. Thank you.

Speaker 5: I think there's a lot of focus on ROI, like how do we do more and what measures should we look at?

I think there's a lot of focus on ROI like how do we do more and what measures should we look at.

Speaker 5: One of the best practices today is Dora Matrix, looking for example at how frequently can we deploy?

One of the best practices today has Dora metrics looking for example at how frequently can we deploy.

Speaker 5: Also, cycle time is becoming really important for customers. How fast can I go from planning something to getting it out there?

Cycle time is becoming really important for customers how fast can I go from planning something to getting it out there we've learned as an industry not to focus on lines of code written it's not a good metric to measure efficiency and with get lapped you're able to look at those value stream metrics much more easily because you have everything in a single platform.

Speaker 10: We've learned as an industry, not to focus on lines of code written. It's not a good metric to measure efficiency. And with GitLab, you're able to look at those value stream metrics much more easily because you have everything in a single platform. And you're able to say, hey, if I move to GitLab, I know I'm able to make faster progress against my most important initiatives. Thank you. Thanks.

And it's and you're able to say hey, if I move to get lap I know I'm able to make faster progress.

Against my most important initiatives.

Got it thank you.

Thanks.

Our next question comes from Matt with RBC.

Speaker 12: Great. Thanks for taking my question, guys. Congrats for me as well. Maybe for either of you, you know, one of the drivers that we think about over the next several years is free to pay. I think you guys have changed slightly sort of how you think about free to pay usage within your base. Can you talk a little bit more about that philosophically? And, you know, are you seeing any benefit from that, you know, in the Q3 results?

Great. Thanks for taking my question guys. Congrats from me as well.

Maybe for either of you.

One of the drivers that we think about over the next couple of years is free to pay I think you guys have changed slightly sort of how you think about free to pay usage within your base can you talk a little bit more about that philosophically are you seeing any benefit from that.

And.

In the Q3 results.

Speaker 3: Yeah, Matt, I'll take that. Thanks for thanks to the question. And so, you know, we did implement a user limit on GitLab.com and it's led good conversion from free to paid. However, the vast majority is small below 5,000, the base customer limit that we report. And so the impact is relatively low. We're continuing to pursue that product-led growth. We think it will be, you know, it's built into our guidance.

Yeah, Matt I'll take that thanks for thanks for the question and so.

Yes, we did implement a user limit on get lab dot com and its led good conversion from free to paid however, the vast majority of these fall below 5000, the base customer limit that we report and so the impact is relatively low we're continuing to pursue that product led growth. We think it will be it's bill.

Speaker 3: And so that's unfree to pay. I'll also take this as just an opportunity. I know a lot of a lot of you have had a wide range of outputs in the model for FY 2025 related to the premium price increase.

<unk> into our guidance.

And so that's on free to paid I'll also take this is just an opportunity I know a lot of.

A lot of you have had a wide range of outputs in the model for FY 2025 related to the premium price increase.

Speaker 3: We're halfway through our planning process right now, so we aren't giving guide internacks here. It's still bitterly.

We're halfway through our planning process right now so we arent, giving guidance for next year, it's still a bit early but the early work that we've done we believe that the premium price increase will contribute roughly $10 million to $20 million in revenue for next year and so it should help you from a modeling perspective.

Speaker 7: But the early work that we've done, we believe that the premium price increase will contribute roughly 10 to 20 million in revenue for next year. And so that should help you out from a modeling perspective. All.

Thanks, guys great detail.

Thanks, Matt.

Speaker 13: Hi, thanks for taking the question. Instead, you mentioned on the call the AWS deal where you'd be out GitHub. I would love to get a little bit more color on the partnerships and with Google and AWS and how that go to markets working and maybe some updates from you there in terms of maybe driving some deal sizes, et cetera.

Joe with Truest is up next.

Alright, thanks for taking the question.

On the call the AWS deal, where you'll be a readout.

Good hub I would love to get a little bit more color on the partnerships and with get with Google and AWS and how that go to market's working and maybe some updates from you there in terms of maybe driving some deal sizes et cetera. Thanks.

Speaker 5: Yeah, thanks, Joel. So we got strong partnerships with both Google and AWS. And they're interested because we help their customers move to their cloud faster. We help them accelerate moving those workloads.

Yeah. Thanks, Joe So we've got strong partnerships with both Google and AWS and they're interested because we help their customers move to their cloud faster.

We help them accelerate moving dose workloads.

Speaker 5: And an interesting thing we did with Google recently, we announced that Google next that they'll be integrating GitLab into their development console for DCP. And that's a really interesting development that will pay off as many things over the longer term. But I think it speaks to the strengths of these partnerships together with the AWS example I mentioned earlier.

And an interesting thing we did with Google recently, we announced that Google next that there'll be integrating get lap into Derrick development console for DCP I think thats.

And <unk>.

Interesting development that will pay off as many things over the longer term.

I think it speaks to the strength of these partnerships together with the AWS example, I mentioned earlier.

Speaker 13: Mr. Crick-Polo, can you just explain to us how maybe Amazon Q, you may work in conjunction with that as a product that being competitive product that might be...

Just a quick follow up.

Can you just explain to us how maybe Amazon Q you may work in conjunction with that as a part of being competitive product that might that'd be helpful as well. Thanks.

Speaker 5: Yeah, for sure. We're going to make sure we're discussing with Amazon how we can make Q work really well with good luck.

Yeah for sure we're going to make sure.

We are discussing with Amazon, how we can make Q work really well with good luck.

Speaker 1: Thank you. Thank you. Thank you so much. And you'll own with JP Moran.

Thank you.

Sure Andrew.

And John with J P. Morgan.

Speaker 14: Hey guys, congrats on the quarter. Just one question for me. Ultimate ERR seems like was a big number, 50% of the ERRR, if I heard that correctly, seems like a big optic sequentially. Has the premium pricing please actually driven kind of a big upgrade cycle for you on ultimate? Or I guess I can tickle the reverse as well, has premium seed growth slowed dramatically as the sequentially

Hey, guys congrats on the quarter.

One question for me ultimately IRR seems like was a big number 50% of the IRR, if I heard that correctly. It seems like a big uptick sequentially has.

Premium price increase actually driven kind of a big upgrade cycle for you on ultimate or I guess I can think of the reverse as well as premium and fee growth slowed dramatically.

Dramatically.

Sequentially.

Speaker 8: Yeah, a couple of things are done packed. Thanks to the question. So just for clarity, we said in the prepared remarks that ultimate bookings were greater than 50% of the total bookings. Ultimate ARR comprises of 43% of the total. And you know, ultimate continues to be our fastest growing tier. Primarily, is it released to our security compliance that's found within ultimate? And so I hope that helps out from a clarity standpoint. That does. Thank you very much.

Yes, a couple a couple of things there to unpack. Thanks for the question so just for clarity.

<unk> said in the prepared remarks that ultimate bookings were greater than 50% of the total bookings ultimate <unk> comprises of 43% of the total and you'll ultimately continues to be our fastest growing tier.

Primarily as it relates to our security and compliance that is found within ultimate and so.

I hope that helps out from a clarity standpoint.

That does thank you very much.

Okay.

Next is Greg with Mizuho.

Speaker 15: All right, thank you for taking the questions. So regarding GitLab Duo, just wondering if there are any usage updates that you might be able to share for suggested reviewers or some of the other features. And then secondly, in your recent state of AI in software development report, which really is excellent by the way, there were a lot of interesting data points. One that caught my eye is that more than half of respondents said that they think AI will replace their role within the next five years.

Alright, Thank you for taking the questions regarding.

Regarding get lab duo just wondering if there are any usage updates that you might be able to share for suggested reviewers are some of the other features and then secondly in your recent state of AI in software development report, which really is excellent by the way there were a lot of interesting data points, one that caught my eye it that more than half of respondents.

Said that they think AI will replace their role within the next five years and I'm wondering if that in any way changes the way in which you're thinking about the impact that <unk> could have on the number of seats over a longer term basis of course. Thank you.

Speaker 5: And I'm wondering if that in any way changes the way in which you're thinking about the impact that Genai could have on the number of seeds over a longer term basis, of course. Thank you. Yeah, thanks to that.

Yeah, thanks to that.

Speaker 5: that another really interesting thing that wasn't that study is that AI needs to be throughout the life cycle and for multiple things, only 25% of the time of a developer spend on coding, 75% is other tasks. And as developers get more productive, they write more code, you need to also increase the productivity of security and operation. So we're focused on making it work throughout the life cycle. I think you'll see parts of roles being...

I think.

Another really interesting thing that wasn't that study is that AI needs to be throughout the lifecycle and for multiple things like only 25% of the time of a developer spend on koning, 75% is other cost and as developers get more productivity they write more.

Coke you need to also increase the productivity of security and operations. So we're focused on making it works throughout the lifecycle.

I think youll see parts of roles being replaced but we'll also will happen is that creating software will get more affordable and I think that will also lead to an increase in the amount of software, providing if something becomes more affordable sometimes consumption goes up in the overall number of people involved increases.

Speaker 5: But what also will happen is that creating software will get more affordable. And I think that will also lead to an increase in the amount of software we're writing. If something becomes more affordable, sometimes consumption goes up and the overall number of people involved increases. Still see a lot of humans being needed in even the medium term. And the productivity going up might be a good thing for the number of people in this sector. That's helpful. Thank you. Thanks.

You'll see a lot of humans being needed in even the medium term.

And the productivity going up might be a good thing for <unk>.

The number of people in this sector.

That's helpful. Thank you.

Next is Andrew with Cowen.

Speaker 16: Great, thanks. Congrats on the quarter. It's Andrew on for Derek. Sid, you're dedicated offering has been GA since June . Can you talk about demand trends there? You mentioned the big eight figure deal. That's great to hear. Talk about how large of a growth driver next year, this could be. Thanks.

Great. Thanks, Congrats on the quarter, it's Andrew on for Derrick.

<unk> said youre dedicated offering has been <unk>.

Since June can you talk about demand trends. There you mentioned the big eight figure deal that's great to hear talk about how how large of a growth driver next year. This can be thanks.

Speaker 5: Yeah, thanks. We're really excited about dedicated for everyone's, as a reminder, it combines the best of GitLab.com and self-managed. You get, we manage it like GitLab.com, but just like self-managed or a single tenant, you have increased isolation and increased security through that. So we believe it's a huge opportunity, especially to convert self-current self-managed customers.

Yes. Thank you. So we're really excited about dedicated for everyone's.

As a reminder, it combines the best of get lumped our common self managed you again, we manage it might get alarm dot com, but just like self managed or a single tenant.

Increased isolation.

And increased security through that so we believe it's a huge opportunity, especially to convert our current self managed customers I.

Speaker 5: I think it's gonna play out over many years. So we're just at the starting point. We're signing those large deals that Brian mentioned, eight-figure TCD expansion in the automotive space. We see more coming.

I think it's going to play out over many years and so we're just at the starting point, we are signing those large deals that Brian mentioned eight figure TCP expansion in the automotive space.

Speaker 5: And I think there's a, there's a, there's a huge opportunity there considering the majority of our revenue comes from self-managed today. And for the larger self-managed customers, this is a great option.

We see more coming.

And I think Theres, a theres a theres a huge opportunity there considering the majority of our revenue comes from self managed today and for the largest self managed customers says is a great option.

Thank you.

Yeah.

Peter with Bernstein.

Speaker 12: Thank you. You know, I think over the last quarter you talked about kind of several exciting things, both with Google and AWS specifically.

They skew.

I think over the last quarter, you talked about kind of several exciting things, both with Google and AWS specifically.

Speaker 12: the integration of GitLab into Google Cloud Console and AWS introducing the sport for GitLab and AWS code pipeline. How can we think about the initial impact of these relationships, you know, either being seen in new or existing customers? I mean, are we seeing more contracts?

The integration of get lab into Google cloud console and AWS introducing support for cloud in AWS code pipeline.

How can we think about the initial impact of.

These relationships.

Either being seen a new or existing customers. I mean are we seeing more contracts through Google cloud AWS or how should we think about it.

Speaker 12: through Google Cloud and the AWS, or how should we think about it?

Speaker 3: I'm happy to start on that. You know, we have several ways that we go to market and through the hyper-scalers is one way. As I've mentioned before, you know, the business that they bring us is somewhat lumpy in nature because they're selling to a wide base of customers.

Yes, I'm happy to start on that yes.

Yes, we have several ways that we go to market and through the Hyperscale or as one way as I've mentioned before the business that they bring us is somewhat lumpy in nature, because they are selling to a wide base of customers, but I'm happy to report that they almost increase their bookings.

Speaker 3: but a happy report that they almost increase their bookings.

Speaker 7: year over year by almost approximately 100% and so we had great contributions from them this quarter and so we continue to work with them on an ablement. We're also technology partners with them as well and so we have a pretty broad-based partnership with both hypershielers.

Year over year by almost.

Approximately 100% and so we had great contributions from them this quarter and so we continue to work with them on enablement. We're also technology partners with them as well and so we have a pretty broad based partnership with both Hyperscale.

Thank you.

Our next question comes from Jason <unk> with William Blair.

Speaker 13: Thank you, hi guys. Just wanted to ask you, excuse me, on the single DevOps platform vision that you've been talking about for many years now. It seems that there is consolidation happening, certainly from a tools perspective, said.

Yeah. Thank you hi, guys just wanted to ask you excuse me on the single Dev Ops platform vision.

As you've been talking about for many years now.

It seems that there is consolidation happening certainly from a tools perspective said.

Speaker 12: But it doesn't sound like larger enterprises really want a single

But it doesn't sound like larger enterprises really want a single.

Speaker 12: DevOps tool they want, maybe instead of 15 or 20 they want four or five. First of all, do you agree with that? Do you think that could change over time? And then for the mid market, so under that 60% that's not large enterprise. How realistic is it for those customers and any evidence so far that they are gravitating towards that sort of single DevOps platform vision?

<unk> tool they want maybe instead of 15 or 20, they want four or five.

First of all do you agree with that do you think that could change over time and then for the mid market. So under 60% that's not large enterprise how realistic is it for those customers and any evidence so far that they are gravitating towards that sort of single Dev ops platform vision.

Yeah, I would say like it's happening. It's finally happening people are or have gotten the message to consolidation is happening.

Speaker 5: Some of them indeed are like, hey we got 15 tools, we got to go to 5.

Some of them Indeed are like Hey, we got 15 tools, we gotta go to find the best ones. The most advanced once they get it. It's just the movement will continue the next thing is from five to one and we have seen customers doing that and having seen customers getting amazing results like the more de consolidate the more they save more to consolidate that.

Speaker 5: The best ones, the most advanced ones, they get it. It's just the movement will continue. The next thing is from five to one and we have seen customers doing that and having seen customers getting amazing results. Like the more they consolidate, the more they save, the more they consolidate the faster their cycle time. We haven't gotten every single customer there yet.

Faster their cycle time, we havent gotten every single customer dairy yet and.

Speaker 5: And it's going to be really important to continue to be an open platform, open to code suggestions everywhere in our code base, open to

And it's going to be really important to continue to be an open platform open to coach suggestions everywhere in our code base open to them.

Speaker 5: having great APIs and open to having very many integrations. We never want to lock customers in, we know that the more they consolidate, the better the outcomes are and we'll keep beating that drum and we'll try to make sure the majority of the market gets there. I think the analysts

Having great Apis and open to having very many integrations, we never want to lock customers in but we know that the more de consolidate the better the outcomes are and we will keep beating that drum and well, we'll try to make sure. The majority of the market gets there I think the analysts are now also repeating the message with Gardner.

Speaker 5: are now also repeating the message with Gardner creating a DevOps platform category.

Creating a dev ops platform category.

And is it fair to say that.

Speaker 13: So source co-management, CI, that sort of an obvious consolidation point is for your larger enterprise customers is it's security compliance that sort of next on the list in terms of putting it into that bundle.

So source code management, and Ci, that's sort of an obvious.

<unk> point.

As for your larger enterprise customers as it security and compliance that sort of next on the list in terms of putting them into that bundle.

Speaker 5: Yeah, I think that's every customer is different, but people have gotten the message and death development.

Yes, I think Thats every customer is different that people have gotten the message in depth development.

Speaker 5: The shift is now happening in security, bringing death and sec together, but the writing is on the wall. Eventually it's going to be death and sec off-sul together in one platform. And that's, that's, we're kind of spreading that gospel.

The shift is now happening is security, bringing depth and SEC together, but the writing is on the wall. Eventually it's going to be desk SEC ops altogether in one platform and that's where we're kind of spreading that gospel.

Speaker 1: Thank you. We have four minutes remaining in the Q&A. Gray with BTIG is next.

Great. Thank you good luck.

Thank you.

We have four minutes remaining in the Q&A Gray with BTG is next.

Speaker 2: Okay, thank you, thank you very much. Maybe a question on the margin side of things. So if I'm looking at the updated guidance for every dollar of new revenue that you add this year, a little over 50% of that's flowing through to the operating income line. Can you talk about what the main drivers of leverage are this year? And then is there any reason that that trend would not continue in the next?

Okay. Thank you. Thank you very much.

Maybe a question on the margin side of things so if I'm looking at the updated guidance.

For every dollar of new revenue that you add this year, a little over 50% of that's flowing through to the operating income line.

Can you talk about what the main drivers of leverage or this year and then is there any reason that.

Did that trend would not continue in the next year.

Speaker 3: Yeah, great. Thanks for your question. You know, super happy big milestone in company history. This is our first quarter of non-GAP operating and composite. You know, since we were on the road to every quarter, we re-emphasized the message, you know, number one goal is to grow and we'll do that responsibly. And so we've been continuing to get operating leverage out of the model. For instance, in Q3 year-to-year, we added approximately 37 million revenue for 10 million of additional expense.

Yeah, great. Thanks for your question Super Happy a big milestone in company history. This is our first quarter of non-GAAP operating income positive.

Since we were on the roadshow in every quarter, we reemphasize the message and our number one goal is to grow and we will do that responsibly and so we've been continuing getting continuing to get operating leverage out of the model for instance in Q3 year over year, we added approximately $37 million of revenue for $10 million of addition.

Speaker 3: And we achieved non-gap operating income positive of 4.7 million. And so as I mentioned earlier, we're early in the process of FY25, we'll give FY25 guidance.

<unk> expense and we achieved non-GAAP operating income positive of $4 7 million and so as I mentioned earlier.

We're early in the process of FY 'twenty five.

We will give FY 'twenty five guidance.

Speaker 3: on our fourth quarter call. And so we'll continue to operate in a disciplinary. Okay, thank you very much. Thanks.

On our fourth quarter call.

So we will continue to operate in a disciplined manner.

Thank you very much.

Thank you.

Alan with Wolfe research.

Speaker 17: Hey guys, just a quick math question for me, Brian , that's $10 million fast. I'll comment on you guys next year's numbers from the pricing increase, it's really helpful. You know what's understandable, growth, current, or NMR has been for premium customers renewing over the last two quarters? And what kind of rough assumptions are you using to get to that out? And that's $20 million.

Hey, guys.

Just a quick math question for me Brian.

$20 million common units next year's number from the price increase is really helpful.

Understand what gross burner than ours, then for premium customers renewing over the last few quarters.

And what kind of a rough assumption are you using.

On the call.

Speaker 3: Yeah, so it's similar to what we walked through before where we took a certain amount of bookings. We saw when they were coming up for renewal, what the stage would be, you know, with the one year for existing customers and then the price increase for new customers. And then taking an average of your average contract term right now is roughly about 15 months.

That's true.

Yes, so its similar to what we walked through before where we talked to you a certain amount of bookings we saw when they are coming up for renewal what the stage would be with the the one year for existing customers and then the price increase for new customers and then take an average of your average contract term right now is roughly about 15 months.

Speaker 3: and then building that waterfall model. And so, I've talked about historically that it is ratable and you have to build the ratable, sort of nature of the waterfall out. Since there's been so many estimates have come out in the various models, we thought it would be good just to quantify what the impact for next year would be to help you with your modeling.

And then building that waterfall model and so I've talked about historically that it is ratable and you have to build the ratable sort of nature of the waterfall out since there's been so many estimates have come out on the various models, we thought it would be good just <unk>.

Quantify what the impact for next year would be to help you with your modeling.

Thank you.

Yeah.

Jonathan with Cantor Fitzgerald.

Speaker 18: Yeah, thank you. So I wanted to ask about the concept of software bill of material. You know, we've seen a lot of software supply chain attacks.

Yes, I do.

So I wanted to ask about the concept of.

Software billow materials, we've seen a lot of software supply chain attacks I think Dubai illustrations executive order really seem to elevate the importance of <unk>.

Speaker 18: I think the Biden administration's executive order really seemed to elevate the importance of software supply chain security. So I'm just kind of curious how you see that plane out in the market. And then the second part of that question is cycle of DX is an open source tool that a lot of companies can use to create these as bombs. So I believe you use that tool. So beyond that, where do you look to differentiate?

Software supply chain security.

Just kind of curious how you see that playing out in the market and then the second part of that question is cycle of Dx as an open source tool that a lot of companies can use to create these as bombs.

So I believe you use that tool.

Beyond that where do you look to differentiate.

Speaker 5: So we have software bills of materials in GitLab today. It's a super important thing to know what you're using within a company. For example, in GitLab, you can also have a law list and denial list based on the licenses that software has.

So we have software bills of materials and got them up and get lab today, It's a super an important thing to know what you are using within a company for example, and get lap you can also have allowed listen deny list based on the licenses that software has of course. It also has security implications.

Speaker 5: Of course, it also has security implications. We help customers with that too. A feature that will be coming up from us to be able to have the ability to have a global S-bomb, kind of aggregate the S-bombs throughout your company, deduplicate it and get that overall view, which I think we will leave one of the first with one of the first companies to do that. Okay, help Wolf.

<unk>.

We help customers with that to a feature that will be coming up from us she able to add the ability to have a global ASP ALM kind of aggregate. The S bumps throughout your company Deduplicate, It and get that overall view, which I think we will be one of the first with one of the first companies to do that.

Okay helpful. Thank you.

Speaker 1: That concludes our Q3 FY24 earnings presentation. Thanks again once more for joining us. Have a great day.

Thank you.

Yeah.

That concludes our Q3 FY 'twenty four earnings presentation based again once more for joining us have a great day.