GitLab (NASDAQ:GTLB) Beats Expectations in Strong Q4, Stock Jumps 15.3%

Radek Strnad /
2022/03/14 4:19 pm EDT
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Software development tools maker GitLab (NASDAQ:GTLB) reported Q4 FY2022 results topping analyst expectations, with revenue up 76.2% year on year to $77.7 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $77.5 million at the midpoint, 5.95% above what analysts were expecting. GitLab made a GAAP loss of $46.7 million, improving on its loss of $74.3 million, in the same quarter last year.

Is now the time to buy GitLab? Access our full analysis of the earnings results here, it's free.

GitLab (GTLB) Q4 FY2022 Highlights:

  • Revenue: $77.7 million vs analyst estimates of $70.2 million (10.6% beat)
  • EPS (non-GAAP): -$0.16 vs analyst estimates of -$0.25
  • Revenue guidance for Q1 2023 is $77.5 million at the midpoint, above analyst estimates of $73.1 million
  • Management's revenue guidance for upcoming financial year 2023 is $388 million at the midpoint, beating analyst estimates by 15.5% and predicting 51.1% growth (vs 66.4% in FY2022)
  • Net Revenue Retention Rate: 152%, up from 130% previous quarter
  • Gross Margin (GAAP): 88.2%, in line with same quarter last year

“We are seeing continued strong momentum for customers adopting our DevOps platform, as revenue increased 69% year-over-year,” said Sid Sijbrandij, GitLab CEO.

Founded as an open-source project in 2011, GitLab (NASDAQ:GTLB) is a leading software development tools platform.

As Marc Andreessen say, "software is eating the world" which means the volume of software produced is exploding. But building software is complex and difficult work which drives demand for software tools that help increase the speed, quality, and security of software deployment.

Sales Growth

As you can see below, GitLab's revenue growth has been incredible over the last year, growing from quarterly revenue of $44.1 million, to $77.7 million.

GitLab Total Revenue

This was another standout quarter with the revenue up a splendid 76.2% year on year. On top of that, revenue increased $10.9 million quarter on quarter, a very strong improvement on the $8.67 million increase in Q3 2022, and a sign of re-acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates GitLab is expecting revenue to grow 43.4% year on year to $77.5 million, slowing down from the 69.1% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $388 million at the midpoint, growing 51.1% compared to 66.4% increase in FY2022.

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What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. GitLab's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 88.2% in Q4.

GitLab Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.88 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop that is still a great gross margin, that allows companies like GitLab to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from GitLab's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on GitLab’s balance sheet, but we note that with a market capitalization of $5.14 billion and more than $934.7 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly GitLab outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. On the other hand, the revenue guidance for next year indicates that the growth will be slightly slowing down. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 15.3% on the results and currently trades at $38.2 per share.

GitLab may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.