Gitlab (GTLB) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Q3 revenue increased 31% YoY to $196 million [14] - Non-GAAP operating margin reached 13.2%, an increase of over 1,000 basis points YoY [14] - Total RPO grew 48% YoY to$ 811.8 million, while CRPO grew 39% YoY to $515.2 million [38] - Non-GAAP gross margin was 91% for the quarter [38] - SaaS revenue grew 44% YoY and now represents 29% of total revenue [39] - Adjusted free cash flow was$ 9.7 million compared to negative $6.7 million in the prior year period [40] Business Line Data and Key Metrics - GitLab Ultimate now accounts for 48% of total ARR [26] - GitLab Duo Pro and Enterprise are driving productivity improvements, with some customers saving up to 2 hours per week and seeing productivity gains of up to 50% [16][20] - GitLab Dedicated is driving demand for Ultimate, with customers achieving quicker time to value and maintaining high security and compliance standards [32] Market Data and Key Metrics - The company has 9,519 customers with ARR of at least$ 5,000, contributing over 95% of total ARR [37] - The $100,000+ ARR customer cohort increased 31% this quarter, reaching 1,144 customers [37] - Dollar-based net retention rate (DBNRR) was 124% in Q3, driven by seat expansion, increased customer yield, and tier upgrades [38] Company Strategy and Industry Competition - The company is focused on AI integration throughout the software development lifecycle, with GitLab Duo Pro and Enterprise leading the way [16][25] - GitLab aims to be the vendor of choice for a comprehensive approach to AI, leveraging its end-to-end DevSecOps platform and self-hosted models for security [22][25] - The company is seeing strong momentum in the public sector, with a record quarter and in-process designation for FedRAMP moderate [34] Management Commentary on Operating Environment and Future Outlook - Management believes the software transformation is still in its early stages, with AI expected to further accelerate this trend [10] - The company is well-positioned to lead in the agentic AI space, with a focus on autonomous and proactive AI capabilities [25] - Management expects continued growth in the DevSecOps market, with significant opportunities for vendor consolidation [74] Other Important Information - The company announced a bundled offering for GitLab Duo with Amazon Q, integrating AI capabilities for AWS customers using GitLab Ultimate [24] - GitLab Advanced SaaS, powered by technology acquired from Oxide, is now generally available for Ultimate customers, providing more accurate vulnerability detection [31] - The company is working towards deconsolidating its China joint venture, JiHu, with$ 14 million in forecasted expenses for FY'25 [43] Q&A Session Summary Question: What stood out in Q3 that led to the strong performance? - The quarter was strong across the board, with record performance in the public sector, strong Ultimate adoption, and best-in-class net dollar retention [49][50] Question: How does the company view the future of AI in the DevSecOps space? - Both GitLab Duo Pro and Enterprise will exist in parallel, with agentic AI representing the next evolution in AI, leveraging GitLab's end-to-end platform [54][55] Question: What is the pricing yield for GitLab Duo? - GitLab Duo makes up over 25% of the total net ARR in year one for top deals, with customers seeing significant productivity gains [69] Question: How does the company view the current market for vendor consolidation? - The company believes it is still in the early innings of vendor consolidation, with significant opportunities to replace DIY DevOps solutions [74] Question: How does the company plan to evolve its pricing model for agentic AI? - While the company cannot comment on future pricing, it is considering different models, including consumption-based pricing, as AI agents become more prevalent [98][99] Question: What is driving the adoption of GitLab Ultimate? - Features like integrated security, compliance, and GitLab Duo Enterprise are driving adoption, with customers seeing significant productivity improvements and cost savings [85][86]