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Thank you for joining us today for GitLab’s Third Quarter of Fiscal Year 2024 Financial Results Presentation. GitLab’s Co-Founder and CEO, Sid Sijbrandij, and GitLab’s Chief Financial Officer, Brian Robins, will provide commentary on the quarter and fiscal year. Please note we will be opening up the call for panelist questions. To ask a question please use the chat feature and post your question directly to IR Questions using the drop-down menu. Before we begin, I’ll cover the Safe Harbor statement. 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. For a complete discussion of risk associated with these forward-looking statements in our business, please refer to our earnings release distributed today in 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. 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 may also discuss financial performance measures that differ from comparable measures contained in our financial statements prepared in accordance with US GAAP. These non-GAAP measures are not intended to be a substitute for our GAAP results. 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 replay of today's call will also be posted on ir.gitlab.com. I will now turn the call over to GitLab’s Co-Founder and Chief Executive Officer, Sid Sijbrandij.

Thank you for joining us today. We delivered a strong quarter. Revenue grew 32% year-over-year, driven by the continued adoption of our DevSecOps Platform. GitLab is the only DevSecOps platform that brings together security, compliance & 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. We believe they need GitLab to help them navigate this complexity and realize business value. Our platform improves engineering productivity, reduces software spend. That’s why our customers report seeing 7x faster cycle times with GitLab. Today, I’ll discuss how we are driving results in three key areas. First, we’re adding new security & governance capabilities in our platform. 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. Let’s start with our security & governance functionality. These are at the heart of our platform and set us apart from the competition. Organizations like CARFAX and Lockheed Martin trust GitLab to help them build security & compliance into their workflows. With GitLab, organizations and their engineering teams report that they catch vulnerabilities earlier in the development process. And compliance leaders can set the right controls and governance frameworks. 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 tool. 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. This extension enables developers to see and address their security findings directly in their IDE while they work, without breaking their flow. Our customers see the value of bringing security and compliance into the same platform where developers work. An example is DoubleVerify, a leading software platform for digital media measurement, data, and analytics. DoubleVerify was previously using GitLab Premium alongside several point solutions for their application security needs. 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. Another key differentiator for us in the security & compliance space is GitLab Dedicated, our single-tenant SaaS solution that provides customers with data isolation and residency. With GitLab Dedicated, customers in highly regulated industries get the benefit of a comprehensive DevSecOps platform while meeting complex and stringent compliance and regulatory requirements. A large telecommunications company in Asia-Pacific recently upgraded to GitLab Dedicated to enhance their privacy and compliance capabilities across their software development lifecycle. In Q3 we also launched a new self-serve portal where customers can configure and maintain their GitLab Dedicated instances. This product innovation will create a more effective onboarding experience for new customers. 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. GitLab Duo is our suite of AI-powered DevSecOps workflows that enable customers to boost speed and efficiency without sacrificing privacy, security, and compliance. We have three principles in our AI strategy. First, we are the only platform that integrates AI throughout the entire software development lifecycle. As developers become more effective, we enable security and operations team members to keep pace. Also, developers only spend 25% of their time writing code. AI within DevSecOps should focus on more than just code creation. 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. Our privacy first approach is why more than 50% of the Fortune 100 trust GitLab to secure their intellectual property. Third, our AI is powered by a diverse set of models from technology partners as well as our own AI models. This allows us to select the best AI model for each use case. In Q3, we released the beta of GitLab Duo Vulnerability Summary. This is a cool feature that provides AI-generated explanations of security vulnerabilities and suggestions for how to fix them. Another example of our progress is GitLab 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. 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, all without context 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. Our approach to AI is resonating with our customers. For example, Amado Gramajo, Vice President of Infrastructure & 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. And, presenting at this year’s Gartner Application Innovation Summit, Bal Kang at NatWest 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. 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. Organizations already see our Enterprise Agile Planning capabilities as a strong alternative to established tools on the market, like Jira. For example, Iron Mountain, a global information management service provider, was struggling to manage the plugins required to integrate Jira with the rest of their development process. By moving from Jira to GitLab Ultimate, Iron Mountain was able to scale their Agile framework to drive more effective collaboration between Enterprise IT teams and key stakeholders. Atlassian’s decision to stop support for its server offering is making customers reconsider what product they use for Enterprise Agile Planning. We are focused on making it easier for these customers to move to GitLab SaaS and self-managed. We recently launched a new Enterprise Agile Planning SKU. Now, GitLab Ultimate customers can easily bring non-technical users into the platform. Security & compliance, AI, and Enterprise Agile Planning strengthen our position as the leader in the DevSecOps platform category. The breadth and depth of our platform across the entire software development lifecycle differentiate us from point solutions and our main competitor, GitHub. Let me give a few examples of why enterprises choose GitLab. First is a leading global financial platform that tried to integrate GitHub with several other DevOps tools. This created complex workflows that required time-consuming maintenance. Now the customer is moving their code 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. Another example is a business networking organization that initially built its software development workflows around GitHub. They began hitting usage limits when running builds, and quickly realized that GitHub was not efficient enough to support their growth. They switched to GitLab Premium and saw a 7x increase in the number of pipelines run. They also needed a comprehensive security & 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 growing customer base. We believe that enterprises need more than a developer platform. They need a full DevSecOps platform that scales and streamlines software development workflows while ensuring robust security and compliance. This was on full display at our DevSecOps World Tour. We recently rounded out this year’s 11-stop World Tour with a final event in Washington, DC. Each event included a fireside chat where customers like Carrefour, Deutsche Telekom, Southwest Airlines, and Splunk shared how they rely on GitLab to improve security, drive efficiency, and accelerate time to market. We created the DevOps Platform category, and we continue to set the standard. We remain focused on helping enterprises build fast and stay secure with tools that teams love to use. We are well-positioned to win in the estimated $40 billion market opportunity in front of us. I’d like to thank all our customers, as well as our partners, team members, community members, and investors, for their continued support. I will now turn it over to Brian Robins, GitLab’s Chief Financial Officer.

Thank you Sid, and thank you again for everyone joining us today. Overall we saw strong performance in the third quarter. Our revenue grew 32% year-over-year and we delivered over 2,200 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 in 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 & governance, AI, and enterprise agile planning. 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. In comparing Q3 with Q2 of FY ‘24, we have seen overall sales cycles lengthen. During Q3 buying behavior in our enterprise segment stabilized. However in the mid-market and SMB, we see customers continue to be cautious in the uncertain macro environment. We have adapted our go-to-market approach in this environment to deliver predictable and strong results. In Q3, our win rates have improved, signaling that the value proposition of our DevSecOps platform is resonating in the market. Contraction during Q3 also improved for the third consecutive quarter and is in-line with levels from Q3 last year. And finally, we continued to see strong adoption of Ultimate, our top tier. Ultimate represented over 50% of Q3 ARR bookings, driven by customer wins for security & compliance use cases. Now, turning to the numbers. Revenue of $149.7 million this quarter represents an increase of 32% organically from Q3 of the prior year. We ended Q3 with over 8,100 customers with ARR of at least 5,000, compared to over 7,800 customers in the second quarter of FY ‘24. This compares to over 6,400 customers in Q3 of the prior year. This represents a year-over-year growth rate of approximately 26%. Currently, customers with greater than 5,000 in ARR represent approximately 95% of our total ARR. We also measure the performance and growth of our larger customers, who we define as those spending more than $100,000 in ARR with us. At the end of the third quarter of FY ‘24, we had 874 customers with ARR of at least $100,000, compared to 810 customers in Q2 of FY ‘24. This compares to 638 customers in the third quarter of FY ‘23. This represents a year-over-year growth rate of approximately 37%. As many of you know, we do not 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. This quarter total RPO grew 40% year-over-year to $548.1 million. cRPO grew 34% to $371.8 million for the same time frame. We ended our third quarter with a dollar-based net retention rate of 128%. As a reminder, this is a trailing 12 month metric that compares the expansion activity of customers over the last 12 months, with that 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 operational changes to our customer account hierarchies. The trend of declining but stabilizing rate has been consistent based on both the previous and the new dollar-based net retention rate calculations. Non-GAAP gross margins were 91% for the quarter, which is consistent with the preceding quarter. This is slightly improved from the third quarter of FY ‘23. 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 SaaS delivery. This is another example of how we continue to drive efficiencies in 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 includes an operating loss of $2.6 million for JiHu, our JV and majority owned subsidiary. On a standalone GitLab basis, Q3 non-GAAP operating income was $7.3 million, or 5% of revenue. Operating cash use was $6.0 million in the third quarter of FY ‘24, compared to a $1.2 million use of cash in operating activities in the same quarter of last year. Since FY ’23, we have been proactively negotiating a bilateral advance pricing agreement, or APA, relating to our transfer pricing arrangements between the Netherlands and the US tax authorities. The proposed agreements between the company, the IRS and the Dutch Tax Authority are not yet final. However, given the stage of discussions during the third quarter, we recorded an estimate of $254 million non-recurring income tax adjustment. This adjustment does not impact our non-GAAP earnings per share. I believe this change positions GitLab for the future by optimizing our long-term tax position. The APA will result in an 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 the exit payment should be recouped as tax savings over future periods. Now let’s turn to guidance. We are assuming that the trends in the business we have seen over the last few quarters continue. 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-over-year. We expect a non-GAAP operating income of $5 million to $6 million. And, we expect a non-GAAP net income per share of $0.08 to $0.09, assuming 164 million weighted average diluted shares outstanding. For the full year FY24, we now expect total revenue of $573 million to $574 million, representing a growth rate of approximately 35% year-over-year. We expect a non-GAAP operating loss of $10 million to $9 million. And, we expect non-GAAP net income per share of $0.12 to $0.13 assuming 162 million weighted average diluted shares outstanding. On a percentage basis, our new annual FY ‘24 guidance implies non-GAAP operating improvement of approximately 1,900 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’m pleased to guide to a profitable non-GAAP operating income in 4Q. We remain on track to achieve free cash flow breakeven for FY25 excluding any non-recurring cash tax payments related to the APA result I discussed earlier. There are a number of drivers we believe will fuel our business in FY ‘25 and beyond. At our core, continuing to deliver customer value with our DevSecOps platform aligns our success with our customers’ success. Additionally in April of this year, we raised the price of our Premium tier for the first time in five years. Thus far, customer behavior has been in-line with our expectations, although as a reminder we anticipate the real financial impact from this change through FY ‘26. Another driver is the launch of Dedicated. GitLab Dedicated allows us to serve companies in highly regulated industries with complex security & compliance requirements. The largest deal we signed in Q3 was an eight-figure TCV expansion with an auto company on Dedicated. The final driver for FY ‘25 and 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. Separately, I would like to provide an update on JiHu, our China joint venture. Our goal remains to deconsolidate JiHu. However, we cannot predict the likelihood or timing of when this may potentially occur. Thus, for modeling purposes for FY ‘24, we now forecast approximately $22 million of expenses related to JiHu, compared with $19 million in FY ‘23. Excluding the impact of JiHu, we anticipate GitLab will be non-GAAP operating income breakeven 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 sales teams and partners to drive a strong quarter. Looking forward, we continue to prioritize driving revenue growth in a responsible manner. With that, we will now move to Q&A. To ask a question please use the chat feature and post your question directly to IR Questions. We are ready for the first question.

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.

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 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. Just want to make sure we understand the opportunity here on the planning side. Thank you.

Yeah, thanks for the question. We're really thrilled about this market opportunity. With enterprise agile planning, we bring portfolio and project management capabilities into the same platform where the 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 DevSec and Ops features. 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. 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, but in the years after.

Thank you.

Up next, we have Karl with UBS.

Congratulations on the results. Sid, I'll pose this question to you. 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 Atlassian Jira, and you called out a large bank that was, in fact, beginning to do that. With the passage of another three months, Sid, do 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?

Yeah, thanks for asking. We're very pleased with our pipeline for this -- for enterprise agile planning in this new SKU we have, and it's being helped by Atlassian's end of support for their server product. 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 GitLab self-managed, sometimes they move to GitLab SaaS, but it is a time, a natural point for them to evaluate. And they see the advantage of bringing together their planning users with their engineers, security people and operations people. The tighter those work together, the faster the cycle time.

Okay, thank you.

Thank you.

Our next question comes from Mike at Needham.

Hey guys, thanks for taking the question here. I did just want to double check. So the first piece there, Brian, I appreciate the update. It sounds like the premium price queue 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 your assumptions for that premium price SKU has changed when we think about that Q4 guidance you guys are putting out there today. Would just like to tackle that first. Thank you.

Yeah, thanks Mike. We're 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 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 expectations.

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.

Yeah, the enterprise percentage of the total has remained pretty consistent. It's around 60% of the total base. And then PubSec is a little over 10%. So SMB and mid-market makes up the remainder.

Thank you.

We will now hear from Ryan at Barclays.

Hey, guys. Thanks for the question. One for Brian and one for Sid. Brian, great to see the strong improvement in net retention. Just for modeling purposes, what was the benefit to the net retention number from the premium price increase? And for Sid, I was just wondering, when it comes to the new capabilities and 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 maybe how they're thinking about that decision. Thanks.

Yeah, I'll take the dollar-based net retention first. And so, I 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, this quarter, if you did the old way, be flat 124% to 124%. But the new way basically takes into the account, the account hierarchies. The old way that we did it actually kept a static view of the parent accounts. And if there was a merger, a new subsidiary, division being shut down or something, that 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 and new to give a 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 124%. And under the new method, it's 128%. Sid, over to you.

Thanks. Regarding AI and SaaS versus self-managed, you're able to do SaaS and AI 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, like most things will ship SaaS first only, then come to self-managed using SaaS for AI and then go to self-managed if they go there at all. 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 the increased kind of 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 SaaS, even if they keep having their self-managed installation. So that's a that's a priority for us.

Excellent. Yeah, we've heard really good feedback on Gitlab 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 or like a general range, that'd be helpful just on net retention side. Thank you.

Yeah, so there -- there'll be an RQ, we'll follow up later today. It was roughly about the same flat quarter-to-quarter. And 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 talked about is in the net dollar retention rate, what the percentage was between seat change, price change and tier change. Historically, seat change has been roughly about 50%. Price change and tier 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 tier change is a little less than 25%.

Excellent, thank you guys.

Thank you.

We will now hear from Kash with Goldman Sachs.

Hey, thank you very much. Happy holidays. Great to see the results. Sid, question for you. It looks like the tone -- your tone and confidence level and conviction level in going after the comparative opportunity with Atlassian and Microsoft is actually stronger than before. I'm curious what gives you the conviction to pursue that comparativeness and what are things that GitLab 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? And second and final, the -- we were waiting for Google to more closely align or for you to closely align your Generative AI efforts with Google. How close or how far are we from a full blown integration and announcement of sorts? Thank you so much.

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 NatWest 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 code suggestions. We recently spoke with a leading international travel agency and they said that the features they tested, 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 DO for generating configurations, test generation, bug finding, and automating operational work. So we're very excited that we have a broad platform so that we can do AI across the life cycle with 14 features for customers available today. You're muted.

Sorry, the other question, the competitiveness against Atlassian 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 opportunity?

Yeah, I think apart from AI, I think it's really unique to GitLab to have better security and compliance. Our features like SaaS and DaaS, 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 Dora metrics that are all unique to GitLab as a DevOps platform. And for example, we had a Q3 deal at a European telecom. We partnered there with AWS and we won against GitHub.

Thank you so much. Happy holidays.

You too.

Nick with Scotiabank is next.

Awesome. Thanks guys. I wanted to build on Ryan's question just around the Generative AI functionality with GitLab Duo. It sounds like there's not going to be really any difference in feature functionality and sort of folding in some of the new enhancements into SaaS and self-manage, but I wanted to ask how you guys think about layering additional feature functionality into premium versus ultimate and whether there's going to be kind of any difference there? And then just as a follow-up to that as you sort of layer in more functionality into that ultimate SKU more broadly, how do you think about pricing? Thanks.

Yeah, I think our code suggestions I think is very comparable to a market. But I think what's unique about GitLab is having 14 AI features in the platform available to customers today. I think that's a big differentiation. As for how do we sell it, some features will be a different SKU, for example code suggestions and that's then available not just to ultimate and premium but also free customers that 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 going to put into ultimate or premium and there might even be extra SKUs we introduce in the future.

Thanks, guys.

Michael with KeyBanc is next.

Hey everybody, good evening. Hey Brian, hey everybody. So given some of that weakness you did call out in SMB from sales cycle and the size perspective, can you just be a little bit more specific about what really drove the upside in the quarter, you still call it an 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?

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.

Right. I guess I meant more from the general demand perspective. In other words, people are using more cloud. Is that driving more need, demand for GitLab subscriptions, seats, et cetera? And again, what's really offsetting that SMB weakness that drove the upside in the quarter?

I think that with GitLab, it has the biggest benefit the more complex your organization is. So the more complex your security and governance, the more heterogeneity in your projects where you go from kind of having projects on mainframe to the latest agile, that is where we can really shine. By bringing that all together in one platform, we typically see a 7x acceleration of cycle time. So 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 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 going to keep getting more complex. You get AI now, you'll have more regulatory friction coming for everyone. So that gives us a lot of optimism about the future.

Thanks, Sid.

Thanks, Michael.

Ethan with Piper Sandler.

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 as these kind of come to maybe start to slow down, how are companies thinking about ramping the velocity of new development projects, especially as we head into 2024. I'd just be curious to hear how you -- customer conversations have been trending on that topic. Thank you.

I think there's a lot of focus on ROI, like how do we do more and what measures should we look at? One of the best practices today is DORA metrics, looking for example at how frequently can we deploy. Also, 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 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.

Got it, thank you.

Thanks.

Our next question comes from Matt with RBC.

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 several years is free to paid. 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 are you seeing any benefit from that in the Q3 results?

Yeah Matt, I'll take that. Thanks for the question. And so we did implement a user limit on GitLab.com, and it's led good conversion from free to paid. However, the vast majorities fall 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 built into our guidance. And so that's on free to paid. I'll also take this as just an opportunity. I know a lot of you have had a wide range of outputs in the model for FY 2025 related to the Premium price increase. We're halfway through our planning process right now. So we aren't 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 out from a modeling perspective.

Thanks, guys. Great detail.

Thanks, Matt.

Joel with Truist is up next.

Hi, thanks for taking the question. Sid, you mentioned on the call the AWS deal where you beat 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-market is working and maybe some updates from you there in terms of maybe driving some deal sizes, et cetera. Thanks.

Yeah. Thanks, Joel. 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 those workloads. And an interesting thing we did with Google recently, we announced at Google Next that they'll be integrating GitLab into their development console for GCP. I think that's a really 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.

Just a quick follow-up. Can you just explain to us how -- maybe [Amazon Q] (ph), you may work in conjunction with that as a part of being a competitive product? That would be helpful as well. Thanks.

Yeah, for sure. We're going to make sure -- we're discussing with Amazon how we can Q work really well with GitLab.

Thank you.

Thanks, Joel.

Pinjalim with JPMorgan.

Hey guys. Congrats on the quarter. Just one question for me. Ultimately, ARR seems like it was a big number, 50% of ARR, if I heard that correctly. It seems like a big uptick sequentially. Has the 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. Has Premium seat growth slowed dramatically sequentially?

Yeah. A couple of things there to unpack. Thanks for the questions. 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 Ultimate continues to be our fastest-growing tier, primarily as it relates to our security and compliance that's found within Ultimate. And so I hope that helps out from a clarity standpoint.

That does. Thank you very much.

Next is Gregg with Mizuho.

Thank you for taking the questions. 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. 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 seats over a longer-term basis, of course. Thank you.

Yeah. Thanks for that. I think that another really interesting thing that was in that study is that AI needs to be throughout the life cycle and for multiple things, like 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 operations. So we're focused on making it work throughout the life cycle. I think you'll see parts of roles being replaced. 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. We still see a lot of units 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.

Next is Andrew with Cowen.

Great. Thanks. Congrats on the quarter. It's Andrew on for Derrick. Sid, your Dedicated offering has been GA since June. Could 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.

Yeah. Thanks. We're really excited about Dedicated. For everyone's -- as a reminder, it combines the best of Gitlab.com and self-managed to 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 our current self-managed customers. I think it's going to play out over many years. So we're just at the starting point. We are signing those large deals that Brian mentioned, eight-figure TCV expansion in the automotive space. We see more coming. And I think 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.

Thank you.

Peter with Bernstein.

Thank you. I think over the last quarter, you talked about kind of several exciting things both with Google and AWS, specifically the integration of GitLab into Google Cloud console and AWS introducing support for GitLab and AWS code pipeline. How can we think about the initial impact of these relationships, either being seen in new or existing customers? I mean, are we seeing more contracts through Google Cloud and AWS? Or how should we think about that?

Yeah, I'm happy to start on that. We have several ways that we go to market, and through the hyperscalers is one way. As I've mentioned before, the business that they bring us is somewhat lumpy in nature because they're selling to a wide base of customers. But I'm happy to report that they almost increased their bookings 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 hyperscalers.

Thank you.

Our next question comes from Jason with William Blair.

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, Sid. But it doesn't sound like larger enterprises really want a single DevOps tool. They want -- maybe instead of 15 or 20, they want 4 or 5. 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?

Yeah. I would say like it's happening -- it's finally happening. People have gotten the message, the consolidation is happening. Some of them indeed are like, hey, we've got 15 tools. We've got to go to five. The best ones, the most advanced ones, they get it. It's just the movement will continue. The next thing is from 5 to 1, 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. 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 having great APIs and open to having very many integrations. We never want to allow customers in. But 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 are now also repeating the message with Gartner creating a DevOps platform category.

Is it fair to say that -- so source code Management CI, that's sort of an obvious consolidation point. Is -- for your larger enterprise customers, is it security and compliance that's sort of next on the list in terms of putting it into that bundle?

Yeah, I think that's -- every customer is different, but people have gotten the message in dev development. The shift is now happening in security, bringing Dev and Sec together. But the writing is on the wall. Eventually, it's going to be DevSecOps all together in one platform. And that's -- we're kind of spreading that cost on.

Great. Thank you. Good luck.

Thank you.

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

Okay. 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 is 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 year?

Yeah. Great. Thanks for your question. Super happy big milestone in company history. This is our first quarter of non-GAAP operating income positive. Since we were on the road show, in every quarter, we reemphasized the message, number one goal is to grow, and we'll 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 additional 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 '25. We'll give FY '25 guidance on our fourth quarter call. And so we'll continue to operate in a disciplined manner.

Okay. Thank you very much.

Thank you.

Allan with Wolfe Research.

Hey guys. Just a quick last question for me. Brian, that $10 million to $20 million is the comment you made to next year's numbers from the pricing increase was really helpful. Would love to understand what gross turn or NRR has been for Premium customers renewing over the last few quarters? And what kind of rough assumptions are you using to get to that $10 million to $20 million next year?

Yeah. So similar to what we walked through before, where we took a certain amount of bookings, we saw when they're coming up for renewal, what the stage would be with the one year for existing customers and then the price increase for new customers and then taking an average of -- our average contract term right now is roughly about 15 months and in 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 that 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 modeling.

Thank you.

Jonathan with Cantor Fitzgerald.

Hi, thank you. So I wanted to ask about the concept of software bill of materials. We've seen a lot of software supply chain attacks. I think the Biden administration's executive order really seem to elevate importance of software supply chain security. So I'm just kind of curious how you see that playing out in the market. And then the second part of that question is CycloneDX is an open-source tool that a lot of companies can use to create these [Dev bombs] (ph). So I believe you used that tool. So beyond that, where do you look to differentiate?

So we have software build 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 allow list and deny list based on the licenses that software has. Of course, it also has security implications. We help customers with that too. A feature that will be coming out from us is the ability to have a global SBOM, kind of aggregate the SBOMs 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.

Thank you.