Software development tools maker GitLab (NASDAQ:GTLB) announced better-than-expected results in the Q1 FY2024 quarter, with revenue up 45.2% year on year to $126.9 million. Guidance for next quarter's revenue was $129.5 million at the midpoint, which is 1.88% above the analyst consensus. GitLab made a GAAP loss of $52.9 million, down on its loss of $26.6 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) Q1 FY2024 Highlights:
- Revenue: $126.9 million vs analyst estimates of $117.8 million (7.7% beat)
- EPS (non-GAAP): -$0.06 vs analyst estimates of -$0.14
- Revenue guidance for Q2 2024 is $129.5 million at the midpoint, above analyst estimates of $127.1 million
- The company lifted revenue guidance for the full year, from $531 million to $542 million at the midpoint, a 2.07% increase
- Free cash flow was negative $11.2 million, compared to negative free cash flow of $12.8 million in previous quarter
- Net Revenue Retention Rate: 128%, down from 133% previous quarter
- Gross Margin (GAAP): 89%, in line with same quarter last year
“With AI revolutionizing how companies develop, secure, and operate software, we believe GitLab is positioned as the leading AI-powered DevSecOps platform,” said Sid Sijbrandij, GitLab CEO and Co-Founder.
Founded as an open-source project in 2011, GitLab (NASDAQ:GTLB) is a leading software development tools platform.
As Marc Andreessen says, "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.
As you can see below, GitLab's revenue growth has been incredible over the last two years, growing from quarterly revenue of $49.9 million in Q1 FY2022, to $126.9 million.
And unsurprisingly, this was another great quarter for GitLab with revenue up 45.2% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $3.99 million in Q1, compared to $9.93 million in Q4 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
Guidance for the next quarter indicates GitLab is expecting revenue to grow 28.2% year on year to $129.5 million, slowing down from the 73.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 22.1% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
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 89% in Q1.
That means that for every $1 in revenue the company had $0.89 left to spend on developing new products, marketing & sales and the general administrative overhead. This is 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. It is good to see that the gross margin is staying stable which indicates that GitLab is doing a good job controlling costs and is not under pressure from competition to lower prices.
Key Takeaways from GitLab's Q1 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 $5.16 billion and more than $937.6 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 and non-GAAP operating loss expectations this quarter. And we were also glad that the revenue guidance for both the next quarter and full year exceeded analysts' expectations. Non-GAAP operating loss guidance was similarly ahead. On the other hand, it was less good to see the deterioration in revenue retention rate--but again, it was better than Wall Street analysts' expectations. Overall, this quarter's results seemed quite positive and shareholders can feel optimistic. The company is up 13.1% on the results and currently trades at $40.04 per share.
Should you invest in GitLab 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.