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Item 8. Financial Statements and Supplementary Data

2023-03-30 compared with 2022-04-08 · 554 added, 413 removed, 693 unchanged (58% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ( KPMG LLP , Pittsburgh, PA , Auditor Firm ID:

Reports of Independent Registered Public Accounting Firm ( KPMG LLP , Pittsburgh, PA , Auditor Firm ID:

Consolidated Balance Sheets as of January 31, 2023 and January 31, 2022

Consolidated Statements of Operations for the years en ded 2022 , 2021 and 2020

Consolidated Statements of Operations for the years ended 202 3 , 202 2 and 202 1

Consolidated Statements of Comprehensive Loss for the years ended 202 3 , 202 2 and 202 1

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

To the Stockholders and the Board of Directors

Opinion on the Consolidated Financial Statements

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 30, 2023 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impact of ineffective control environment

As disclosed in management’s report on internal control over financial reporting, the Company identified a material weakness as of January 31, 2023 associated with ineffective information technology general

controls (ITGCs) in the areas of user access and change-management over information technology (IT) systems that support the Company’s financial reporting processes.

Automated and manual business process controls dependent on ITGCs were also deemed ineffective, because they could have been adversely impacted by the ineffective ITGCs.

This material weakness affects substantially all financial statement accounts.

We identified the evaluation of the sufficiency of audit evidence in response to the material weakness as a critical audit matter.

Evaluating the sufficiency of the audit evidence obtained required significant auditor judgment because of the pervasive nature of the material weakness identified above.

The following are the primary procedures we performed to address this critical audit matter.

• We applied significant auditor judgment to determine the timing, nature and extent of procedures to be performed over processes impacted by the material weakness.

• We reflected the effect of the material weakness in our assessment of risk and performed the procedures closer to the balance sheet date.

• These procedures included lowering testing thresholds, increasing sample sizes and manually testing the completeness and accuracy of system generated reports.

• We evaluated the overall sufficiency of audit evidence obtained by assessing the results of the procedures performed.

Evaluation of standalone selling prices (SSPs) for self-managed subscription and self-managed license performance obligations

As discussed in Note 3 to the consolidated financial statements, the Company recognized self-managed subscription revenue and self-managed license revenue of $275.3 million and $46.0 million, respectively, for the year ended January 31, 2023.

The Company allocates the transaction price to each performance obligation based on the relative SSP.

To determine SSP the Company maximizes the use of observable standalone sales and observable data where available.

In instances where performance obligations do not have observable standalone sales, the Company utilizes available information that may include market conditions, pricing strategies, the economic life of the software, and other observable inputs and uses the expected cost plus margin approach to estimate the price the Company would charge if the products and services were sold separately.

We identified the evaluation of SSPs for self-managed subscription and self-managed license performance obligations as a critical audit matter.

We performed a sensitivity analysis to determine the key assumption used to determine SSP, which required challenging auditor judgment.

Specifically, challenging and subjective auditor judgment was required to evaluate the estimated costs to develop the paid features in the expected cost plus margin approach.

Additionally, the estimate of SSP was sensitive to variation in this key assumption.

The following are the primary procedures we performed to address this critical audit matter.

• We evaluated the overall methodology used to determine the estimate of SSPs based on the expected cost plus a margin approach.

• We performed sensitivity analyses over the Company’s assumptions used to determine the SSPs to identify the costs to develop the paid features as the key assumption and to assess the impact of changes in the assumption on the Company’s SSPs.

• We assessed the reasonableness of the key assumption by comparing it to historical data, internal data, and relevant peer data, where available.

• We evaluated the data utilized by management to estimate the cost to develop the paid features by examining a selection of requests to merge code and interviewing the Company’s engineering team.

• We tested the mathematical accuracy of management’s calculations of estimated selling prices.

We have served as the Company’s auditor since 2019.

Pittsburgh, Pennsylvania

April 8, 2022

March 30, 2023

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

Opinion on Internal Control Over Financial Reporting

We have audited GitLab Inc.

and subsidiaries' (the Company) internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2023 and January 31, 2022, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended January 31, 2023, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated March 30, 2023 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material weaknesses related to the following have been identified and included in management’s assessment:

The Company had a lack of policies and procedures related to the operation of control activities and inadequate communication of information to control owners and operators related to the objectives and responsibilities for internal control in a manner which supports the internal control environment at the Company.

As a result, the Company had ineffective information technology general controls in the areas of user access and change-management over information technology systems that are relevant to the Company’s preparation of their consolidated financial statements;

and ineffective process level controls that use information that cannot be relied on from the affected systems, including those related to stock-based compensation and non-routine transactions.

In addition, the Company had ineffective process level controls over manual journal entries and over stock-based compensation resulting from insufficient documentation maintained to support the operation of controls including the level of precision at which controls are executed.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of

internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Pittsburgh, Pennsylvania

March 30, 2023

Consolidated Balance Sheets

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Property and equipment, net 5,797 3,271

Operating lease right-of-use assets 998 —

Equity method investment 12,682 —

Goodwill 8,145 8,145

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TOTAL ASSETS $ 1,169,200 $ 1,091,438

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

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Commitments and contingencies (Note 14)

CONVERTIBLE PREFERRED STOCK

Convertible preferred stock, $ 0.0000025 par value;

no shares and 79,959 shares authorized as of January 31, 2022 and January 31, 2021, respectively;

no shares and 79,551 shares issued and outstanding as of January 31, 2022 and January 31, 2021, respectively

STOCKHOLDERS’ EQUITY (DEFICIT):

STOCKHOLDERS’ EQUITY:

Preferred stock, $ 0.0000025 par value;

50,000 shares and no shares authorized as of January 31, 2022 and January 31, 2021, respectively;

no shares issued and outstanding as of January 31, 2022 and January 31, 2021, respectively

50,000 shares authorized as of January 31, 2023 and January 31, 2022;

no shares issued and outstanding as of January 31, 2023 and January 31, 2022

Class A Common stock, $ 0.0000025 par value;

1,500,000 and 163,000 shares authorized as of January 31, 2022 and January 31, 2021, respectively;

1,500,000 shares authorized as of January 31, 2023 and January 31, 2022;

94,655 and 27,141 shares issued and outstanding as of January 31, 2023 and January 31, 2022, respectively

Class B Common stock, $ 0.0000025 par value;

250,000 and 163,000 shares authorized as of January 31, 2022 and January 31, 2021, respectively;

250,000 shares authorized as of January 31, 2023 and January 31, 2022;

56,489 and 119,747 shares issued and outstanding as of January 31, 2023 and January 31, 2022, respectively

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Accumulated other comprehensive income (loss) ( 705 ) 7,724

Total GitLab stockholders' equity (deficit) 774,866 ( 231,222 )

Total GitLab stockholders’ equity 771,020 774,866

Noncontrolling interests 53,705 24,403

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 799,269 ( 231,222 )

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 1,091,438 $ 362,566

(1) As of January 31, 2022, the consolidated balance sheet includes assets and liabilities of the consolidated variable interest entity, GitLab Information Technology (Hubei) Co., LTD (“JiHu”), of $ 17.7 million and $ 3.7 million, respectively.

TOTAL STOCKHOLDERS’ EQUITY 824,725 799,269

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,169,200 $ 1,091,438

(1) As of January 31, 2023 and January 31, 2022, the consolidated balance sheet includes assets of the consolidated variable interest entity, GitLab Information Technology (Hubei) Co., LTD (“JiHu”), of $ 62.8 million and $ 17.7 million, respectively, and liabilities of $ 8.9 million and $ 3.7 million, respectively.

The assets of JiHu can be used only to settle obligations of JiHu and creditors of JiHu do not have recourse against the general credit of the Company.

Refer to “Note 11.

Joint Venture and Majority Owned Subsidiary” for further discussion.

The accompanying notes are an integral part of these consolidated financial statements.

Joint Venture and Equity Method Investment” for further discussion.

The accompanying notes are an integral part of these consolidated finan cial statements.

Consolidated Statements of Operations

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Other income (expense), net 21,585 ( 30,850 ) 23,452

Loss before income taxes ( 159,071 ) ( 189,362 ) ( 129,541 )

Loss before income taxes and loss from equity method investment ( 175,330 ) ( 159,071 ) ( 189,362 )

Loss from equity method investment, net of tax ( 2,468 ) — —

Provision for (benefit from) income taxes 2,898 ( 1,511 ) 2,832

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Foreign currency translation adjustments ( 5,874 ) 27,639 ( 24,005 )

Net change in unrealized losses on available-for-sale securities ( 4,855 ) — $ —

Comprehensive loss including noncontrolling interest $ ( 191,425 ) $ ( 129,921 ) $ ( 216,199 )

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(in thousands)

Convertible Preferred Stock Common Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Noncontrolling Interests Total Stockholders’ (Deficit) Equity

Shares Amount Shares Amount Shares Amount Shares Amount

Balance at January 31, 2019

65,546 $ 156,969 48,483 $ — — $ — — $ — $ 24,882 $ ( 75,264 ) $ ( 75 ) $ — $ ( 50,457 )

Series E financing, less issuance costs of $ 326

14,413 268,177 — — — — — — — — — — —

Conversion to dual class common stock structure — — ( 48,483 ) — — — 48,483 — — — — — —

Conversion of Class B common stock to Class A common stock — — — — 1,151 — ( 1,151 ) — — — — — —

Issuance of common stock related to vested exercised stock options — — — — — — 1,475 — 743 — — — 743

Issuance of common stock related to early exercised stock options, net of repurchases — — — — — — 531 — — — — — —

Vesting of early exercised stock options — — — — — — — — 671 — — — 671

Stock-based compensation expense — — — — — — — — 40,872 — — — 40,872

Foreign currency translation adjustments — — — — — — — — — 4,165 — 4,165

Net loss — — — — — — — — — ( 130,741 ) — — ( 130,741 )

Twelve Months Ended January 31, 2023

Convertible Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Noncontrolling Interests Total Stockholders’ Equity

Shares Amount Shares Amount Shares Amount

Balance at January 31, 2020 79,959 $ 425,146 1,151 $ — 49,338 $ — $ 67,168 $ ( 206,005 ) $ 4,090 $ — $ ( 134,747 )

79,959 $ 425,146 — $ — 1,151 $ — 49,338 $ — $ 67,168 $ ( 206,005 ) $ 4,090 $ — $ ( 134,747 )

Repurchase of common stock — — — — ( 20 ) — ( 820 ) — — — ( 820 )

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Balance at January 31, 2021 79,551 $ 424,904 1,151 $ — 52,468 $ — $ 186,892 $ ( 398,199 ) $ ( 19,915 ) $ — $ ( 231,222 )

79,551 $ 424,904 — $ — 1,151 $ — 52,468 $ — $ 186,892 $ ( 398,199 ) $ ( 19,915 ) $ — $ ( 231,222 )

Conversion of convertible preferred stock to Class B common stock upon initial public offering ( 79,551 ) ( 424,904 ) — — 79,551 — 424,904 — — — 424,904

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Net loss — — — — — — — ( 155,138 ) — ( 2,422 ) ( 157,560 )

Balance at January 31, 2022 — $ — 27,141 $ — 119,747 $ — $ 1,320,479 $ ( 553,337 ) $ 7,724 $ 24,403 $ 799,269

Conversion of Class B common stock to Class A common stock — — 66,162 — ( 66,162 ) — — — — — —

Issuance of common stock related to vested exercised stock options — — — — 2,940 — 24,846 — — — 24,846

Issuance of common stock under employee stock purchase plan — — 437 — — — 14,378 — — — 14,378

Repurchases, net of early exercised stock options — — — — ( 36 ) — — — — — —

Issuance of common stock related to RSUs vested, net of tax withholdings — — 915 — — — — — — — —

Vesting of early exercised stock options — — — — — — 4,706 — — — 4,706

Stock-based compensation expense — — — — — — 114,811 — — 7,756 122,567

Other comprehensive loss — — — — — — — — ( 8,429 ) ( 2,300 ) ( 10,729 )

Change in noncontrolling interest ownership due to capital contributions from noncontrolling interest holders, net of issuance costs — — — — — — 18,153 — — 43,573 61,726

Deconsolidation of Meltano Inc.

— — — — — — — — — ( 11,342 ) ( 11,342 )

Net loss — — — — — — — ( 172,311 ) — ( 8,385 ) ( 180,696 )

Balances at January 31, 2023

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Stock-based compensation expense 122,567 30,009 111,846

Operating lease non-cash expense 562 — —

Gain from the fair value change of acquisition related contingent consideration ( 1,722 ) — —

Amortization of intangible assets 2,362 665 222

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Amortization of deferred contract acquisition costs 44,958 33,368 18,469

Gain from deconsolidation of Meltano Inc.

( 17,798 ) — —

Loss from equity method investment 3,189 — —

Net amortization of premiums or discounts on short-term investments ( 6,077 ) — —

Unrealized foreign exchange (gain) loss ( 3,727 ) 20,389 ( 24,322 )

Other non-cash expense 197 458 122

Other non-cash expense, net 594 197 458

Changes in assets and liabilities:

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Prepaid expenses and other current assets ( 8,909 ) ( 8,219 ) 677

Costs deferred related to contract acquisition ( 42,575 ) ( 34,137 ) ( 15,223 )

Deferred contract acquisition costs ( 48,555 ) ( 42,575 ) ( 34,137 )

Other long-term assets 3,012 ( 3,374 ) 252

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Purchases of property and equipment ( 6,070 ) ( 3,541 ) —

Deconsolidation of Meltano Inc.

( 9,620 ) — —

Payments for business combination, net of cash acquired and consideration withheld in an escrow — ( 323 ) —

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Proceeds from the issuance of common stock upon exercise of stock options, including early exercises, net of repurchases 24,515 25,354 13,765

Issuance of common stock under employee stock purchase plan 14,378 — —

Proceeds from warrants exercised — 86 —

Net proceeds from Series E preferred stock financing — — 268,177

Repurchase of common stock in a tender offer — ( 590 ) ( 820 )

Contributions received from noncontrolling interests 26,450 — —

Contributions received from noncontrolling interests, net of issuance costs 61,726 26,450 —

Partial settlement of acquisition related contingent cash consideration ( 3,137 ) — —

Payments of deferred offering costs — ( 4,667 ) —

Net cash provided by financing activities 97,482 701,185 12,945

Impact of foreign exchange on cash, cash equivalents and restricted cash 6,846 1,000 ( 226 )

Net increase (decrease) in cash, cash equivalents and restricted cash 604,322 ( 60,477 ) 210,873

Impact of foreign exchange on cash and cash equivalents ( 3,658 ) 6,846 1,000

Net increase (decrease) in cash and cash equivalents ( 589,270 ) 604,322 ( 60,477 )

Cash, cash equivalents, and restricted cash at beginning of period 887,172 282,850 343,327

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Cash and cash equivalents $ 295,402 $ 884,672 $ 282,850

Restricted cash, included in prepaid expenses and other current assets 2,500 — —

Restricted cash, included in other long-term assets — 2,500 —

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While the Company is headquartered in San Francisco, California, it operates on an all-remote model.

The Company is a technology company and its primary offering is “GitLab,” a complete DevOps platform delivered as a single application.

The Company is a technology company and its primary offering is “GitLab”, a complete DevSecOps platform delivered as a single application.

GitLab is used by a wide range of organizations.

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The Company is focused on accelerating innovation and broadening the distribution of its platform to companies across the world to help them become better software-led businesses.

In January 2019, the Company’s board of directors and stockholders approved an amendment to the Company’s amended and restated certificate of incorporation effecting a four -to-one stock split of the Company’s issued and outstanding shares of common and convertible preferred stock.

The split was effected on February 28, 2019.

The par values of the common and convertible preferred stock were also adjusted as a result of the stock split.

All issued and outstanding share and per share amounts included in the accompanying consolidated financial statements and notes thereto have been adjusted to reflect this stock split for all periods presented.

Initial Public Offeri ng (“IPO”)

On October 18, 2021, the Company closed its IPO of 8,940,000 shares of Class A common stock at an offering price of $ 77.00 per share, including 520,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares of Class A common stock, resulting in net proceeds to the Company of $ 654.6 million, after deducting underwriting discounts of $ 33.8 million, and before the deferred offering costs discussed below.

In addition, an entity affiliated with the Company’s founder and the CEO sold 2,500,000 shares of Class A common stock (upon conversion of shares of Class B common stock) at the IPO.

The Company did no t receive any proceeds from the sale of shares of its Class A common stock by the selling stockholder.

Prior to the IPO, deferred offering costs, which consist primarily of legal, accounting, consulting, and other fees related to the Company’s IPO, were capitalized in prepaid expense and other current assets on the consolidated balance sheets.

During the year ended January 31, 2022, the Company incurred $ 4.7 million of deferred offering costs.

Upon consummation of the IPO, the deferred offering costs of $ 4.7 million previously capitalized were reclassified into stockholders’ equity as a reduction of the IPO proceeds on the consolidated balance sheets.

Upon the closing of the IPO, 79.6 million shares of the Company’s outstanding convertible preferred stock were automatically converted into an equal number of shares of Class B common stock.

On December 3, 2021, the Company completed the acquisition of Opstrace, Inc., a technology company based in San Francisco, California.

Refer to “Note 5.

Business Combination” for further discussion of the transaction.

Impact of COVID-19

The World Health Organization declared in March 2020 that the recent outbreak of the coronavirus disease, or COVID-19, constituted a pandemic.

The COVID-19 pandemic has caused general business

disruption worldwide beginning in January 2020.

While the Company has experienced and may continue to experience a modest adverse impact on certain parts of its business, including a lengthening in the sales cycle for some prospective customers and delays in the delivery of professional services and trainings to customers, the Company’s results of operations, cash flows, and financial condition have not been adversely impacted to date.

However, as certain customers or partners experience downturns or uncertainty in their own business operations or revenue resulting from the spread of COVID-19, they may continue to decrease or delay their spending, request pricing discounts, or seek renegotiations of their contracts, any of which may result in decreased revenue and cash receipts for the Company.

In addition, the Company may experience customer losses, including due to bankruptcy or customers ceasing operations, which may result in an inability to collect accounts receivable from these customers.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted.

The global impact of COVID-19 continues to rapidly evolve, and the Company will continue to monitor the situation and the effects on its business and operations closely.

The Company does not yet know the full extent of potential impacts on its business or operations or on the global economy as a whole, particularly if the COVID-19 pandemic continues and persists for an extended period of time.

See Part I, Item IA, “Risk Factors” in this Annual Report on Form 10-K for additional information.

Given the uncertainty, we cannot reasonably estimate the impact on our future results of operations, cash flows, or financial condition.

Basis of Presentation and Summary of Significant Accounting Policies

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

Such estimates include, but are not limited to, allocation of revenue to the license element in the Company's self-managed subscriptions, estimating the amortization period for capitalized costs to obtain a contract, allowance for doubtful accounts, fair valuation of stock-based compensa tion, fair value of contingent consideration, valuation allowance for deferred income taxes, valuation of intangibles assets, and impairment of goodwill.

The Company bases these estimates on historical and anticipated results, tre nds, and various other assumptions, including the impact of the COVID-19 pandemic, that it believes are reasonable under the circumstances, including assumptions as to future events.

Such estimates include, but are not limited to, allocation of revenue to the license element in the Company's self-managed subscriptions, estimating the amortization period for capitalized costs to obtain a contract, allowance for doubtful accounts, stock-based compensa tion expense, fair value of contingent consideration, fair valuation of retained interest in an investee on loss of control, valuation allowance for deferred income taxes, valuation of intangibles assets and impairment of goodwill and equity method investments.

The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events.

Actual results could differ from those estimates.

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dollars at historical exchange rates.

Gains or losses from foreign currency remeasurement and settlements are included in foreign exchange gains (losses), net in other income (expense), net on the consolidated statements of operations.

Gains or losses from foreign currency remeasurement and settlements are included in foreign exchange gains (losses), net which is presented within other income (e xpense), net on the consolidated statements of operations.

For the years ended January 31, 2023 , 2022 and 2021, the Company recognized foreign exchange gains (losses), net of $ 4.4 million, $( 29.1 ) million and $ 23.4 million, respectively.

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For the years ended January 31, 2023, 2022 and 2021, the Company recognized foreign translation adjustments of $( 5.9 ) million, $ 27.6 million and $( 24.0 ) million, respectively.

Foreign currency translation adjustments and the offsetting foreign exchange gain or losses for the periods presented are primarily caused by the intercompany loans of short-term nature for entities where functional currency is not the U.S.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents as of January 31, 2022 and 2021, consisted of cash held in checking and savings accounts and investments in money market accounts.

Cash and cash equivalents as of January 31, 2023 and 2022, consists of cash held in checking and savings accounts, investments in money market accounts and certain highly-liquid investments.

The Company considers all highly-liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents.

Restricted cash consists of $ 2.5 million acquisition related security deposit withheld in an escrow for post-closing indemnification claims recorded in other long-term assets on consolidated balance sheet as of January 31, 2022, refer to “Note 5.

Restricted cash as of January 31, 2023 and 2022, consists of a $ 2.5 million acquisition related security deposit withheld in an escrow for any potential post-closing indemnification claims.

Refer to “Note 7.

Business Combination .”

Short-Term Investments

The Company classifies certificates of deposits with banks with an original maturity of three months or greater at the date of purchase as short-term investments and such investments are carried at amortized cost, which approximates their fair value.

Short-Term Investments - Marketable Securities

The Company classifies its marketable securities with stated maturities of three months and greater at the date of purchase as short-term investments due to its ability to use these securities to support the Company’s current operations.

As of January 31, 2023, a ll short-term investments are classified as available-for-sale and are reported at fair value, which is based on quoted market prices for such securities, if available, or based on quoted market prices of financial instruments with similar characteristics.

If the fair value of a security falls below its amortized cost, the carrying value is reduced to its fair value if management intends to sell or it is more likely than not that it will be required to sell before recovery of the amortized cost basis.

If neither of these conditions are satisfied, impairment is assessed for credit losses by comparing the present value of expected cash flows with the amortized cost basis, and an allowance for credit losses is recorded for the excess of amortized cost over expected cash flows.

Impairment losses not attributable to credit losses are reported as a separate component of other comprehensive loss, net of tax.

As of January 31, 2022, short-term investments comprised of certificates of deposit with a bank with an original maturity of greater than three months at the date of purchase.

Such investments were carried at amortized cost, which approximated their fair value.

The cost of securities sold is based on the specific-identification method and realized gains and losses on available-for-sale securities are recognized upon sale and are included in other income (expense), net in the consolidated statements of operations.

Interest on securities classified as available-for-sale is included within Interest income on our consolidated statements of operations.

Accounts Receivable and Allowance for Doubtful Accounts

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The Company extends credit of typically 30 to 60 days to its customers in the normal course of business and does not require collateral from its customers.

The Company establishes an allowance for doubtful accounts based on its es timate of the collectability of the accounts.

The estimate is based on the age of the individual outstanding invoices and the collection history of each customer .

As of January 31, 2022 and 2021, the allowance for doubtful accounts was $ 1.1

million and $ 1.0 million, re spectively.

The allowance for doubtful accounts is the Company’s best estimate of the amount of expected credit losses in existing accounts receivable.

As of January 31, 2023 and 2022, the allowance for doubtful accounts was $ 1.6 million and $ 1.1 million, respectively.

Accounts receivable deemed uncollectible are written off against the allowance when identified.

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At times, cash deposits may be in excess of insured limits.

The Company believes that the financial institutions that hold its cash, cash equivalents, restricted cash, and short-term investments are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

To minimize credit losses on accounts receivable, the Company extends credit to customers based on an evaluation of their ability to pay amounts due under contractual arrangement.

The Company believes that the financial institutions or corporations that hold its cash, cash equivalents, restricted cash, and short-term investments are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

The Company maintains allowances for potential credit losses on accounts receivable when deemed necessary.

The Company uses various distribution channels.

There was one distribution channel whose balance represented 14 % of the accounts receivable balance as of January 31, 2022.

There were no distribution channels or individual customers whose balance represented more than 10% of the accounts receivable balance as of January 31, 2021.

There were no c ustomers whose revenue represented more than 10% of total revenue during the years ended January 31, 2022, 2021 and 2020.

As of January 31, 2023, one of these channel partners represented 12 % of the accounts receivable balance, while as of January 31, 2022 another channel partner represented 14 % of the accounts receivable balance.

There were no individual customers whose balance represented more than 10% of accounts receivable as of January 31, 2023 and 2022, respectively.

There were no customers whose revenue represented more than 10% of total revenue during the years ended January 31, 2023, 2022 and 2021.

Fair Value of Financial Instruments

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The Company measures assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, to measure the fair value:

GAAP describes a fair value hierarchy based on

three levels of inputs, of which the first two are considered observable and the last unobservable, to measure the fair value:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

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Our self-managed subscriptions include two performance obligations:

(i) to provide access to proprietary features in our software, and (ii) to provide support and maintenance (including the combined obligation to provide software updates on when and if available basis).

(i) to provide access to proprietary features in our software, and (ii) to provide support and maintenance (including the combined obligation to provide software updates on a when-and-if-available basis).

Our SaaS products provide access to hosted software as well as support, which is evaluated to be a single performance obligation.

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Some of our customers have the option to purchase additional licenses or renew at a stated price.

These options are evaluated on a case-by-case basis but generally do not provide a material right as they are either at the same price as the existing licenses or are within our range of standalone selling price and, as such, would not result in a separate performance obligation.

These options are evaluated on a case-by-case basis but generally do not provide a material right as they are either at the same price as the existing licenses or are within our range of standalone selling price (“SSP”) and, as such, would not result in a separate performance obligation.

Where material rights are identified in our contracts, they are treated as separate performance obligations.

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If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

For contracts that contain multiple performance obligations, we allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“SSP”) for each performance obligation.

For contracts that contain multiple performance obligations, we allocate the transaction price for each contract to each performance obligation based on the relative SSP for each performance obligation.

We use judgment in determining the SSP for our products and services.

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We have concluded that (i) the right to use the software and (ii) the right to receive technical support and software fixes and updates are two distinct performance obligations in our self-managed subscriptions.

Since neither of these performance obligations are sold on a standalone basis, we estimate stand-alone selling price for each performance obligation using a model based on the “expected cost plus margin” approach and update the model on an annual basis or when facts and circumstances change.

Since neither of these performance obligations are sold on a standalone basis, we estimate SSP for each performance obligation using a model based on the “expected cost-plus margin” approach and update the model on an annual basis or when facts and circumstances change.

This model uses observable data points to develop the main inputs and assumptions, which include the estimated historical costs to develop the paid features in the software license and the estimated future costs to provide post-contract customer support.

5) Revenue is recognized when or as we satisfy a performance obligation .

Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised products and services to a customer.

Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised products

and services to a customer.

We recognize revenue when we transfer control of the products and services to our customers for an amount that reflects the consideration that we expect to receive in exchange for those products and services.

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Subscription - self-managed

The Company's self-managed and SaaS subscriptions consist of support, maintenance, upgrades and updates on a when-and-if-available basis.

Revenue for support and maintenance is recognized ratably over the contract period based on the stand-ready nature of these subscription elements.

The Company offers three tiers of paid subscriptions as part of the self-managed model:

Starter, Premium, and Ultimate.

The Company's self-managed subscriptions include support, maintenance, upgrades, and updates on a when-and-if-available basis.

Revenue for self-managed subscriptions is recognized ratably over the contract period based on the stand-ready nature of subscription elements.

The Company offers two tiers of paid subscriptions as part of the self-managed model:

Premium and Ultimate.

Subscriptions for self-managed licenses include both (i) a right to use the underlying software (License revenue - Self managed) and (ii) a right to receive post-contract customer support during the subscription term (Subscription revenue - Self managed).

Post-contract customer support comprises maintenance services (including updates and upgrades to the software on a when-and-if-available basis) and support services.

The Company has concluded that the right to use the software, which is recognized upon delivery of the license, and the right to receive technical support and software

fixes and updates, which is recognized ratably over the term of the arrangement, are two distinct performance obligations.

Since neither of these performance obligations are sold on a standalone basis, the Company estimates the stand-alone selling price for each performance obligation using a model based on the “expected cost plus margin” approach and updates the model on an annual basis or when facts and circumstances change.

The Company has concluded that the right to use the software, which is recognized upon delivery of the license, and the right to receive technical support and software fixes and updates, which is recognized ratably over the term of the arrangement, are two distinct performance obligations.

Since neither of these performance obligations are sold on a standalone basis, the Company estimates the SSP for each performance obligation using a model based on the “expected cost-plus margin” approach and updates the model on an annual basis or when facts and circumstances change.

This model uses observable data points to develop the main inputs and assumptions which include the estimated historical costs to develop the paid features in the software license and the estimated future costs to provide post-contract customer support.

Based on this model, the Company allocated between 1 - 15 % of the entire transaction price to the right to use the underlying software (License revenue - Self managed) and allocated the remaining value of the transaction to the right to receive post-contract customer support (Subscription revenue - Self managed) during the period covered by these consolidated financial statements.

Starter tier is now deprecated and available for a limited transitory period to our existing customers.

We also offer three tiers of paid SaaS subscriptions:

Starter (previously Bronze), Premium (previously Gold), and Ultimate (previously Platinum).

These subscriptions provide access to our latest managed version of our product hosted in a public cloud.

Based on this model, the Company allocated between 1 to 23 % of the entire transaction price to the right to use the underlying software (License revenue - Self managed) and allocated the remaining value of the transaction to the right to receive post-contract customer support (Subscription revenue - Self managed) during the period covered by these consolidated financial statements.

The typical term of a subscription contract for self-managed offering is one to three years.

As of January 2021, Starter tier is no longer offered to new customers but remains available for a limited transitory period to our existing customers.

We also offer two tiers of paid SaaS subscriptions:

Premium and Ultimate.

These subscriptions provide access to our latest managed version of our product hosted in a public or private cloud based on the customer’s preference.

Revenue from our SaaS products (Subscription revenue - SaaS) is recognized ratably over the contract period when the performance obligation is satisfied.

The typical term of a subscription contract for self-managed or SaaS offering is one to three years.

Starter tier is now deprecated and available for a limited transitory period to our existing customers.

The typical term of a subscription contract for SaaS offering is one to three years.

As of January 2021, Starter tier is no longer offered to new customers but remains available for a limited transitory period to our existing customers.

License - self-managed and other

The license component of our self-managed subscriptions reflects the revenue recognized by providing customers with rights to use proprietary software features.

The Company allocates between 1 - 15 % of the transaction value to License revenue, which is recognized upfront when the software license is made available to our customer.

Other revenue consists of professional services revenue which is primarily derived from fixed fee offerings which are subject to customer acceptance.

The Company allocates between 1 to 23 % of the transaction value to License revenue, which is recognized upfront when the software license is made available to our customers.

Other revenue consists of professional services revenue which is derived from fixed fee and time and materials offerings, subject to customer acceptance.

Given the Company’s limited history of providing professional services, uncertainty exists about customer acceptance and therefore, control is presumed to transfer upon confirmation from the customer, as defined in each professional services contract.

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Revenues” of the consolidated financial statements.

Deferred Revenue

Deferred Revenue and Contract Assets

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract.

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In limited cases, the Company has offered deferred payment terms of a maximum of one year in contracts with a one year contractual term.

Contract assets include amounts related to our

contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced;

such amounts have been immaterial to date.

During the fiscal years ended January 31, 2022, 2021 and 2020, $ 87.1 million, $ 58.1 million and $ 29.2 million, respectively, of revenue was recognized, which was included in the corresponding deferred revenue balance at the beginning of the reporting periods presented.

For multi-year license subscriptions, we generally invoice customers annually at the beginning of each annual coverage period and the license revenue for the full multi-year term is recognized upfront on delivery from deferred revenue.

Where the value of revenue recognized exceeds the value of amounts invoiced for a contract at the end of a reporting period, it is reclassed from deferred revenue to contract assets until invoiced.

Contract assets are included in prepaid expenses and other current assets on the consolidated balance sheets.

During the years ended January 31, 2023, 2022 and 2021, $ 145.9 million, $ 87.1 million and $ 58.1 million, respectively, of revenue was recognized, which was included in the corresponding deferred revenue balance at the beginning of the reporting periods presented.

The increase in deferred revenue balances for the periods presented is mainly attributable to the growth of contracts with new as well as existing customers.

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As of January 31, 2023 and 2022, the aggregate amount of the transaction price allocated to billed and unbilled remaining performance obligations for which revenue has not yet been recognized was approximately $ 435.9 million and $ 312.4 million, respectively.

As of January 31, 2022, we expected to recognize approximately 65 % of the transaction price as product or services revenue over the next 12 months and the remainder thereafter.

As of January 31, 2023, the Company expected to recognize approximately 71 % of the transaction price as product or services revenue over the next 12 months and 92 % over the next 24 months.

Deferred Contract Acquisition Costs

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The deferred commission and bonus amounts are recoverable through the future revenue streams from our customer contracts all of which are non-cancelable.

Commissions and bonuses paid upon the acquisition of an initial contract are amortized over an estimated period of benefit which has been determined generally to be three years based on historical analysis of average customer life and useful life of our product offerings.

Commissions and bonuses paid upon the acquisition of an initial contract are amortized over an estimated period of benefit which has been determined generally to be three years based on historical

analysis of average customer life and useful life of our product offerings.

Commissions paid for subsequent renewals are amortized over the renewal term.

Amortization is recognized on a straight-line basis and included in sales and marketing expenses in the consolidated statements of operations.

However, costs for commissions that are incremental to obtain a self-managed license contract are expensed immediately.

The Company periodically reviews these deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs.

The Company did not recognize any impairment of deferred contract acquisition costs during the periods presented.

The following table presents the change in deferred contract acquisition costs (in t housands):

The following table presents the change in deferred contract acquisition costs (in thousands):

2023 2022 2021

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Ending balance $ 42,133 $ 39,106 $ 30,476

Deferred Offering Costs

Deferred offering costs consist primarily of legal, accounting, consulting, and other fees related to the Company’s IPO, and were capitalized in prepaid expenses and other current assets on the consolidated balance sheets prior to the IPO.

Upon consummatio n of the IPO, the deferred offering costs of $ 4.7 million were reclassified into stockholders’ equity (deficit) as a reduction of the IPO proceeds on the consolidated balance sheets.

There were no deferred offering costs recorded as of January 31, 2022 and 2021.

Cost of Revenue

Cost of revenue for self-managed and SaaS subscriptions consists primarily of allocated cloud-hosting costs paid to third party service providers, third-party cloud infrastructure expenses incurred in connection with the customers’ use of GitLab;

compensation paid to the Company's customer support personnel, including contractors;

and allocated overhead.

Cost of revenue for self-managed license includes personnel-related expenses.

Other costs of revenue include professional services, primarily compensation paid to the Company's professional services personnel, including contractors;

Cost of revenue for self-managed and SaaS subscriptions consists primarily of allocated cloud-hosting costs paid to third party service providers, personnel-related costs associated with our customer support personnel, including contractors;

and allocated overhead.

Personnel-related expenses consist of salaries, benefits, bonuses, and stock-based compensation.

Cost of self-managed license and other revenue consists primarily of contractor and personnel-related costs, including stock-based compensation expenses, associated with the professional services team and customer support team, and allocated overhead.

Research and Development

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Loss Contingencies

If an exposure to any potential claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.

If an exposure to any potential claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company records a liability for the estimated loss.

Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable.

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Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and the tax basis of assets and liabilities, as well as for operating losses and tax credit carryforwards.

Deferred tax assets and liabilities are measured using the tax rates that are

expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled.

Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized.

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Comprehensive Loss and Accumulated Other Comprehensive Income (Loss)

Comprehensive loss includes net loss and changes in stockholders’ equity (deficit) that are excluded from net loss due to changes in the Company’s cumulative foreign currency translation account.

Comprehensive loss includes net loss and changes in stockholders’ equity (deficit) that are excluded from net loss due to changes in the Company’s cumulative foreign currency translation account and unrealized gains or losses on short-term investments.

Net Loss per Share Attributable to Common Stockholders

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For this calculation, convertible preferred stock, warrants and stock options are considered potentially dilutive instruments.

While the convertible preferred stock has participating rights for dividends, it does not participate in losses and hence will not qualify as a participating security in the periods in which the Company generates a loss.

While the convertible preferred stock had participating rights for dividends, it did not participate in losses and hence did not qualify as a participating security in the periods in which the Company generated a loss.

Stock-Based Compensation

The Company has granted equity classified stock-based awards consisting primarily of stock options to team members, members of its board of directors, and non-employee advisors.

The Company has granted equity classified stock-based awards to team members, members of its board of directors, and non-employee advisors.

The majority of the Company's stock-based awards have been granted to team members and the service-based vesting condition for the majority of these awards is satisfied over four years .

The cost of stock-based awards granted to team members is measured at the grant date, based on the fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period.

The cost of stock-based awards granted to team members is measured at the grant date, based on the fair value of the award, and is generally recognized as expense on a straight-line basis over the requisite service period.

Forfeitures are recorded as they occur.

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The fair value of the RSUs was determined utilizing a Monte Carlo valuation model.

Any portion of these RSUs may only be earned upon a corporate transaction or after a liquidity event and only to the extent Mr.

Sijbrandij continues to lead the company as our CEO.

We will recognize total stock-based compensation expense over the derived service period of each tranche using the accelerated attribution method, regardless of whether the stock price hurdles are achieved.

We recognize total stock-based compensation expense over the derived service period of each tranche using the accelerated attribution method, regardless of whether the stock price hurdles are achieved.

Refer to “Note 10.

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We recognize stock-based expenses related to the shares to be issued under the ESPP on a straight-line basis over the offering period, using the Black-Scholes option-pricing model, and determine volatility over an expected term based on the historical volatility of the Company’s peer group, until we establish a sufficient public trading history of our own stock price.

The ESPP provides for up to a 27-month offering period, and includes four purchase periods of approximately six months .

The ESPP allows eligible team members to purchase shares of our common stock at a 15 % discount on the lower price of either (i) the offering period begin date or (ii) the purchase date.

The ESPP also includes a reset provision for the purchase price if the stock price on the purchase date is less than the stock price on the offering date.

In June 2022, the Company granted 0.4 million performance stock units (“PSUs”) to senior members of its management team subject to a revenue performance condition and service conditions.

The number of PSUs that will ultimately vest will depend on the revenue achieved by the Company in fiscal 2025 relative to the defined target and these estimates are regularly reviewed by the Company.

The fair value of PSUs is measured at the market price of the Company’s Class A common stock on the date of grant and compensation costs related to awards expected to vest are recognized on a graded-vesting method over the requisite service period.

The estimate of awards expected to vest is reassessed by management at each reporting period.

In fiscal 2023, the board of directors of JiHu approved an employee stock option plan (“JiHu ESOP”) for its employees.

The fair value of Restricted Stock Awards (“RSAs”) and stock option awards is measured on the date of grant and compensation costs related to these awards are recognized on a graded attribution method as the grants include a performance condition.

The Company considers the RSAs and stock option awards granted pursuant to the JiHu ESOP as potentially dilutive equity instruments that will result in dilution of the Company’s stake in JiHu upon vesting of such award (or, in the case of option awards granted pursuant to the JiHu ESOP, upon vesting and subsequent exercise into shares of JiHu common stock).

Any such dilution will be accounted for as an equity transaction.

Until such awards granted pursuant to the JiHu ESOP are vested (or, in the case of option awards, vested and ultimately exercised into shares of JiHu common stock), the Company will continue to record the recognized stock-compensation expense of JiHu as part of the noncontrolling interest.

Segment Reporting

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Accordingly, we operate our business as one operating segment and one reporting unit.

The Company presents financial information about geographical mix of revenue and long-lived assets in Note 3 and Note 4, respectively, of the consolidated financial statements.

The Company presents financial information about geographical mix of revenue in “Note 3.

Revenues” of the consolidated financial statements.

Business Combination

On December 3, 2021, th e Company completed the acquisition of Opstrace, Inc., a technology company based in San Francisco, California.

We include the results of operations of the businesses that we acquire beginning from the respective dates of acquisition.

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We amortize our acquired intangible assets in business combinations and asset acquisitions on a straight-line basis with definite lives over a period of three years .

The liabilities for any contingent consideration are established at the time of the acquisition and will be evaluated at each reporting date.

Any change in the fair value adjustment is recorded in general and administrative expenses.

Property and Equipment, Net

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The Company depreciates leasehold improvements over the shorter of the remaining lease term or estimated us eful life of five years , a nd computers over two years .

The Company determines whether an arrangement is or contains a lease at inception, based on whether there is an identified asset and whether the Company controls the use of the identified asset throughout the period of use.

At the lease commencement date, the Company determines the lease classification between finance and operating and recognizes a right-of-use asset and corresponding lease liability for each lease component.

A right-of-use asset represents the Company’s right to use an underlying asset and a lease liability represents the Company’s obligation to make payments during the lease term.

The Company only has operating leases of office premises leased by JiHu.

The Company accounts for lease components and non-lease components separately.

We do not recognize operating lease right-of-use assets and operating lease liabilities that arise from short-term leases (i.e., leases with a term of 12 months or less).

The lease liability is initially measured as the present value of the remaining lease payments over the lease term.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

The discount rate used to determine the present value is the Company’s incremental borrowing rate unless the interest rate implicit in the lease is readily determinable.

The Company estimates its incremental borrowing rate based on the information available at lease commencement date for borrowings with a similar term.

The right-of-use asset is initially measured as the present value of the lease payments adjusted for prepaid lease payments to lessors .

Lease expense is recognized on a straight-line basis over the lease term.

Impairment of Long-lived Assets

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We test our goodwill for impairment at least annually in the fourth fiscal quarter of each year, or more frequently if events or changes in circumstances indicate that this asset may be impaired.

We found no goodwill impairment in any of the periods presented.

Preferred Stock

There has been no beneficial conversion feature with respect to the preferred stock issued by the Company and the conditions for separation have not been met;

as such, the entire proceeds have been allocated to preferred stock.

Based on an analysis of qualitative and quantitative factors, including our market capitalization, we determined no goodwill impairment in any of the periods presented.

Equity Method Investment

The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest in the investee.

The Company’s equity method investments are reported at cost and adjusted each period for its proportionate share of the investee’s income or loss.

The cost on initial recognition of retained interest in an erstwhile subsidiary is based on fair value on the date of loss of control.

The Company’s proportionate share of the net loss resulting from the investment is reported under loss from equity method investment, net of tax in our consolidated statements of operations.

The carrying value of the Company’s equity method investments is reported in equity method investment in the consolidated balance sheets.

The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable.

Recently Adopted Accounting Standards

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which requires a customer in a hosting arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, Intangibles-Goodwill and Other , to determine which implementation costs to capitalize as assets or expense as incurred.

The Company has prospectively adopted ASU 2018-15 as of February 1, 2021 with no material impact.

Recently Issued Accounting Standards Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes ( Topic 740 ):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes in order to reduce cost and complexity of its application.

The Company adopted ASU 2019-12 as of February 1, 2022 with no material impact.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“Topic 842”).

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Under Topic 842, lessees are required to recognize assets and liabilities on the consolidated balance sheet for most leases and provide enhanced disclosures.

Leases will continue to be classified as either finance or operating.

For public companies, Topic 842 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years.

The Company has elected to use the extended transition period that allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies under the JOBS Act.

For as long as the Company remains an “emerging growth company,” the new guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted.

The adoption of ASU 2016-02 is not expected to have a material effect on the Company’s consolidated financial statements.

The Company has adopted the Topic 842 effective February 1, 2022 by utilizing the modified retrospective transition method through a cumulative-effect adjustment to the operating lease right-of-use assets and operating lease liabilities on our consolidated balance sheet as on February 1, 2022 in the amount of $ 0.7 million and $ 0.8 million, respectively.

The adoption of Topic 842 did not have an impact on accumulated deficit as of February 1, 2022.

Refer to “Note 11.

Joint Venture and Equity Method Investment” for more information.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the

measurement and recognition of expected credit losses for financial assets held at amortized cost.

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses.

Since the Company follows private company’s adoption timelines, this new guidance is effective for the Company for its fiscal year beginning February 1, 2023.

The Company is currently evaluating the effect of the adoption of ASU 2016-13 on its consolidated financial statements.

The effect will largely depend on the composition and credit quality of the Company's portfolio of financial assets and the economic conditions at the time of adoption.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

This new guidance is effective for the Company for its fiscal year beginning February 1, 2022 and interim periods within its fiscal year beginning February 1, 2023.

Early adoption is permitted.

The adoption of ASU 2019-12 is not expected to have a material effect on the Company’s consolidated financial statements.

These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts.

This ASU requires enhanced disclosures relating to significant estimates and judgments used in estimating credit losses, as well as the credit quality.

As an erstwhile emerging growth company (EGC), the Company had previously elected to adopt ASU 2016-13 for its fiscal year beginning February 1, 2023.

However, due to the loss of EGC status as on January 31, 2023, the Company has adopted ASU 2016-13 for fiscal year 2023.

The adoption of this ASU did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

There are no recently issued accounting pronouncements that we believe will have a material impact on our financial position, results of operations or cash flows.

Disaggregation of Revenue

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No other individual country exceeded 10% of total revenue for any of the periods presented.

We operate our business as a single reportable segment.

Balance Sheet Components

The Company operates its business as a single reportable segment.

Cash, Cash Equivalents and Short-Term Investments

The following table summarizes the Company’s cash, cash equivalents and short-term investments by category (in thousands):

As of January 31, 2023

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Cash and cash equivalents:

Cash $ 232,332 $ — $ — $ 232,332

Money market funds 60,073 — — 60,073

Agency securities 2,997 — — 2,997

Total cash and cash equivalents $ 295,402 $ — $ — $ 295,402

Short-term investments:

Commercial paper 88,703 18 ( 112 ) 88,609

Corporate debt securities 95,805 33 ( 572 ) 95,266

Municipal bonds 1,989 — ( 19 ) 1,970

Foreign government bonds 2,211 — ( 41 ) 2,170

Agency securities 74,158 2 ( 435 ) 73,725

Treasury securities 383,238 — ( 3,729 ) 379,509

Total short-term investments $ 646,104 $ 53 $ ( 4,908 ) $ 641,249

As of January 31, 2022, the Company had $ 884.7 million of cash and cash equivalents, and $ 50.0 million of short-term investments, comprised of certificates of deposit with a bank with an original maturity of greater than three months at the date of purchase.

Such investments were carried at amortized cost, which approximated their fair value and matured during the year ended January 31, 2023.

The Company uses the specific-identification method to determine an y realized gains or losses from the sale of our short-term investments classified as available-for-sale.

For the periods presented, the Company did not have any material realized gains or losses as a result of maturities or sale of short-term investments.

During the year ended January 31, 2023, the Company recorded $ 14.5 million of interest income on cash equivalents and short-term investments which includes $ 6.1 million of net amortization of premiums or discounts on short-term investments during the year ended January 31, 2023.

During the year ended January 31, 2022 and 2021, the Company recorded $ 0.7 million and $ 1.1 million of interest income on cash equivalents and short-term investments, respectively.

The Company did no t record any amortization of premiums or discounts during the year ended January 31, 2022 and 2021.

As of January 31, 2023, the Company does not have any cash equivalents and short-term investments that have been in a continuous unrealized gain or loss position for more than 12 months as of the periods presented.

The following table summarizes unrealized losses on our cash equivalents and short-term investments by category that have been in a continuous unrealized loss position for less than 12 months as of the periods presented (in thousands):

Carrying Value Gross Unrealized Losses

January 31, 2023

Agency securities $ 73,724 $ ( 435 )

Commercial paper 45,015 ( 112 )

Corporate debt securities 75,203 ( 572 )

Municipal bonds 1,970 ( 19 )

Foreign government bonds 2,170 ( 41 )

Treasury securities 379,509 ( 3,729 )

Total cash equivalents and short-term investments $ 577,591 $ ( 4,908 )

The following table classifies the Company’s short-term investments by contractual maturities (in thousands):

January 31, 2023 January 31, 2022

Amortized cost Fair Value Amortized cost Fair Value

Due within 1 year $ 480,943 $ 477,520 $ 50,031 $ 50,031

Due between 1 year to 2 years 165,161 163,729 — —

Total $ 646,104 $ 641,249 $ 50,031 $ 50,031

All available-for-sale securities have been classified as current, based on management’s ability to use the funds in current operations.

Fair Value Measurements

The Company determines fair value based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.

The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement.

The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Inputs are unobservable based on the Company’s own assumptions used to measure assets and liabilities at fair value.

The inputs require significant management judgment or estimation.

The fair value of the Company’s Level 1 financial instruments, such as money market funds which are traded in active markets, is based on quoted market prices for identical instruments.

The fair value of the Company’s Level 2 financial instrumen ts such as commercial paper, corporate debt and U.S.

government securities are obtained from an independent pricing service, which may use inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security that may not be actively traded.

The Company’s marketable securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models.

Financial assets measured at fair value on a recurring basis are summarized below (in thousands):

Level 1 Level 2 Level 3 Fair Value

January 31, 2023 (1)

Cash equivalents:

Money market funds $ 60,073 $ — $ — $ 60,073

Agency securities — 2,997 — 2,997

Short-term investments:

Commercial paper — 88,609 — 88,609

Corporate debt securities — 95,266 — 95,266

Municipal bonds — 1,970 — 1,970

Foreign government bonds — 2,170 — 2,170

Agency securities — 73,725 — 73,725

Treasury securities — 379,509 — 379,509

Total $ 60,073 $ 644,246 $ — $ 704,319

(1) Exclu des $ 232.3 million in cash held in the Company’s bank accounts as of January 31, 2023.

The Company had $ 3.4 million and $ 7.9 million of Level 3 contingent consideration as of January 31, 2023 and 2022, respectively.

Refer to “Note 6.

Supplemental Financial Statement Information” for further details.

Supplemental Financial Statement Information

Prepaid Expenses and Other Current Assets

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Prepaid software subscriptions $ 7,771 $ 3,950

Prepaid insurance 3,199 4,309

Prepaid expenses for the Company’s events 1,885 266

Prepaid taxes 592 3,168

Prepaid advertising costs 367 722

Prepaid payroll deposits 981 1,125

Prepaid insurance 4,309 9

Prepaid income taxes 3,168 785

Other prepaid expenses 1,915 1,834

Restricted cash (1)

Interest receivable 2,310 49

Revenue contract asset 1,532 —

Security and other deposits 510 981

Other current assets 1,746 265

Total prepaid expense and other current assets $ 24,327 $ 15,544

(1) Refer to “Note 7.

Business Combination”.

Property and Equipment, Net

Property and equipment, net of the following (in thousands):

January 31, 2022

January 31, 2023 January 31, 2022

Computer and office equipment $ 8,581 $ 3,049

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Accumulated depreciation (1)

Total property and equipment, net $ 3,271

Depreciation expense of property and equipment was $ 0.5 million for the year ended January 31, 2022.

Geographical Information

Long-lived assets, comprising of property and equipment, net, by geographic area were as follows based on their physical location (in thousands):

January 31, 2022

United States $ 2,233

Other countries (1)

( 3,992 ) ( 543 )

Total property and equipment, net (1)

(1) No other individual country accounted for more than 10% of the Company’s property and equipment, net for the period presented .

$ 5,797 $ 3,271

(1) The amounts in the table above include cumulative foreign currency translation adjustments, reflecting movement in the currencies of the underlying property and equipment.

Depreciation expense of property and equipment was $ 3.2 million, $ 0.5 million and zero for the years ended January 31, 2023, 2022 and 2021, respectively.

Other Long-Term Assets

Other assets consisted of the following (in thousands):

Other long-term assets consisted of the following (in thousands):

January 31, 2023 January 31, 2022

Security and other deposits $ 3,172 $ 2,832

Restricted cash (1)

Security deposits 2,832 1,500

Deferred software implementation costs 594 969

Other long-term assets 321 850

Total other assets $ 7,151 $ 1,500

Total other long-term assets $ 4,087 $ 7,151

(1) Refer to “Note 7.

Business Combination” for a discussion of restricted cash related to the acquisition of Opstrace, Inc.

Business Combination”.

Accrued Expenses and Other Current Liabilities

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Accrued expenses $ 10,686 $ 8,605

Income taxes payable 319 206

ESPP employee contributions 6,557 —

Indirect taxes payable 4,498 4,044

Customer refunds 3,465 2,017

ESPP employee contributions 2,967 6,557

Acquisition related consideration withheld in escrow (1)

Income taxes payable 859 319

Operating lease liabilities - current portion 716 —

Acquisition related contingent cash consideration (1)

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Total accrued expenses and other current liabilities $ 25,954 $ 24,571

Accrued Compensation and Benefits

(1) Refer to “Note 7.

Business Combination”.

Accrued Com pensation and Benefits

Accrued compensation and benefits consisted of the following (in thousands):

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Payroll taxes payable 3,013 14,506

Accrued team member related payables, excluding commissions 9,897 1,709

Other accrued team member related payables 9,251 9,897

Total accrued compensation and benefits $ 20,776 $ 32,820

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January 31, 2023 January 31, 2022

Early exercised options liability $ 6,837 $ 8,103

Acquisition related contingent cash consideration (1)

Acquisition related consideration withheld in an escrow 2,500 —

$ 3,443 $ 4,929

Provision towards labor matters (2)

Early exercised options liability 1,800 6,837

Deferred tax liabilities 849 379

Contingent liability for labor matters 2,573 2,062

Long term taxes payable 647 784

Operating lease liabilities - long-term portion 413 —

Acquisition related consideration withheld in escrow (1)

Other long-term liabilities 168 —

Total other long-term liabilities $ 9,824 $ 18,002

(1) Refer to “Note 7.

Business Combination”.

(2) Refer to “Note 14.

Commitments and Contingencies ”.

Other Inc ome (Expense), Ne t

Other income (expense), net consisted of the following (in thousands):

Fiscal Year Ended January 31,

2023 2022 2021

Gain from deconsolidation of Meltano Inc.

$ 17,798 $ — $ —

Foreign exchange gains (losses), net 4,364 ( 29,140 ) 23,423

Other expense, net ( 577 ) ( 1,710 ) 29

Total other income (expense), net $ 21,585 $ ( 30,850 ) $ 23,452

(1) Refer to “Note 11.

Joint Venture and Equity Method Investment”.

Business Combination

On December 3, 2021, th e Company completed the acquisition of Opstrace, Inc., a technology company based in San Francisco, California.

The Company anticipates that this acquisition will provide an out-of-the-box, tested, integrated observability platform deployed within The DevOps Platform.

The transaction was accounted for as a business combination.

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Contingent common stock consideration (classified under additional paid-in capital) 1,754

Contingent cash consideration (classified under accrued expenses and other current liabilities) 3,007

Contingent cash consideration

Contingent cash consideration (classified under other long-term liabilities)

Total consideration $ 13,583

Cash consideration includes $ 2.5 million held back as partial security for post-closing indemnification claims made within 18 months of the acquisition date recorded in other long-term liabilities on consolidated balance sheet as of January 31, 2022.

The Company issued 26,574 shares of the Company’s Class B common stock paid as of the closing date, of which 15,673 shares issued to the founders and employees will have to vest over four years .

The $ 1.4 million fair value of 15,673 unvested restricted stock is not included as purchase consideration above, as it has a post-combination service requirement and will be accounted for separately from the business combination as stock compensation expense.

The contingent cash consideration is determined based upon the satisfaction of certain defined operational milestones and will be remeasured at fair value at each reporting period through earnings.

Cash consideration includes $ 2.5 million held back as partial security for post-closing indemnification claims made within 18 months of the closing da te recorded in a ccrued expenses and other current

liabilities on the consolidated balance sheet as of January 31, 2023 and in other long-term liabilities as of January 31, 2022.

As a result of acquisition, the fair value of the consideration transferred included contingent cash considerations of $ 7.9 million in aggregate.

These contingent cash considerations are determined based upon the satisfaction of certain defined operational milestones and are remeasured at fair value at each reporting period through earnings.

As the fair value is based on unobservable inputs, the liabilities are included in Level 3 of the fair value measurement hierarchy.

The unobservable inputs used in the determination of the fair value of the contingent cash considerations include managements assumptions about the likelihood of payment

based on the satisfaction of certain defined operational milestones and discount rates based on cost of debt.

The change in the fair value recorded in fiscal year 2022 was not material.

Contingent stock consideration is classified as equity and will not be remeasured.

Acquisition related costs of approximately $ 0.5 million were expensed by the Company in general and administrative expenses in its consolidated statement of operations for the year ended January 31, 2022.

The Company recorded the assets acquired and liabilities assumed at their estimated fair values, with the difference between the fair value of the net assets acquired and the purchase consideration reflected in goodwill.

The total purchase price of $ 13.6 million was allocated using information currently available to the Company.

As a result, the Company may continue to adjust the preliminary purchase price allocation after obtaining more information regarding asset valuations, liabilities assumed, and revisions of preliminary estimates.

The following table reflects the preliminary fair values of assets acquired and liabilities assumed (in thousands):

Cash and cash equivalents $ 147

Developed technology 6,200

Goodwill 8,145

Accrued expenses and payroll ( 178 )

Deferred tax liability ( 731 )

Net assets acquired $ 13,583

As of December 3, 2021, developed technology of the acquired business had an estimated useful life of three years .

The goodwill is primarily attributed to the synergies expected to be realized following the acquisition and the assembled workforce.

Goodwill is not deductible for U.S.

federal income tax purposes.

Non-cash investing activities involving this acquisition as reflected in the consolidated statements of cash flows for th e fiscal year 2022 were as follows (in thousands):

Supplemental disclosure of non-cash investing activities:

Consideration withheld in an escrow $ 2,500

Issuance of common stock in connection with business combination $ 959

Contingent cash consideration in connection with business combination $ 7,900

Contingent stock consideration in connection with business combination $ 1,754

In September 2022, one of the operational milestones was achieved and the Company paid $ 4.2 million of contingent cash consideration, part of which was previously recorded in accrued expenses and other current liabilities.

The difference of $ 1.1 million between the amount accrued and the amount paid was attributable to the change in fair value of the original measurement and was recorded as a loss in general and administrative expenses during the year ended January 31, 2023.

We reassessed the fair value of outstanding operational milestones and recorded the fair value gain of $ 1.7 million in general and administrative expenses for the year ended January 31, 2023.

Accretion expense was $ 0.3 million for the year ended January 31, 2023.

There was no accretion expense for the years ended January 31, 2022 and 2021.

Results of operations of the business acquired have been included in our consolidated financial statements subsequent to the date of acquisition.

The revenue and net income (loss) earned by the business acquired following the acquisition are not material to our consolidated results of operations.

Pro forma statements have not been presented because they are not material to our consolidated results of operations.

The revenue and net loss earned by the business acquired following the acquisition are not material to our consolidated results of operations.

Goodwill and Intangible Assets, Net

The changes in the carrying amount of goodwill were as follows (in thousands):

The carrying amount of goodwill was as follows (in thousands):

Carrying Amount

Balance as of January 31, 2021 $ —

Addition 8,145

Balance as of January 31, 2022 $ 8,145

Balance as of January 31, 2023 and January 31, 2022

There was no goodwill impairment for any periods presented.

Intangible Assets

Intangible assets consisted of the following as of January 31, 2022 (in thousands):

Gross Carrying Amount Accumulated Amortization Net Book Value

Intangible assets, net consisted of the following (in thousands):

January 31, 2023 Gross Carrying Amount Accumulated Amortization Net Book Value Weighted average remaining amortization period (years)

Developed technology from business combination $ 6,200 $ ( 2,401 ) $ 3,799 1.8

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Total $ 7,559 $ ( 3,658 ) $ 3,901

Intangible assets consisted of the following as of January 31, 2021 (in thousands):

Gross Carrying Amount Accumulated Amortization Net Book Value

January 31, 2022 Gross Carrying Amount Accumulated Amortization Net Book Value Weighted average remaining amortization period (years)

Developed technology from business combination $ 6,200 $ ( 334 ) $ 5,866 2.8

Developed technology from asset acquisitions (1)

1,402 ( 983 ) 419 1.3

Total $ 7,602 $ ( 1,317 ) $ 6,285

(1) The amounts in the tables above include cumulative foreign currency translation adjustments, reflecting movement in the currencies of the underlying intangibles.

During fiscal year 2022, the Company acquired $ 6.2 million of developed technology through a business combination with estimated weighted average remaining amortization period of 2.8 years as of January 31, 2022 .

Our developed technology from asset acquisitions acquired in prior years had an estimated weighted average remaining amortization period of 1.3 years a s of January 31, 2022.

Amortization expense was $ 0.7 million, $ 0.2 million and zero for the fiscal years ended January 31, 2022, 2021 and 2020, respectively.

As of January 31, 2022, future amortization expense related to the intangibles assets is expected to be as follows (in thousands):

Amortization expense was $ 2.4 million, $ 0.7 million and $ 0.2 million for the years ended January 31, 2023, 2022 and 2021, respectively.

As of January 31, 2023, future a mortization expense related to the intangibles assets is expected to be as follows (in thousands):

Total future amortization $ 3,901

Debt Financing

Line of Credit

On March 25, 2016, the Company executed a Loan and Security Agreement (the “Agreement”) with a financial institution in the United States (as amended from time to time, including the First Amendment to the Agreement dated December 9, 2016, the Second Amendment to the Agreement dated May 31, 2018, and the Third Amendment to the Agreement dated April 2, 2019).

As per the amended Agreement, the Company had access to a line of credit of up to $ 15 million, to be taken in single or multiple drawdowns.

The draws could be taken beginning March 25, 2016 (the “Closing Date”) and payable by the maturity date of June 30, 2020.

In May and October 2020, the Company further amended the Agreement to restate certain terms and definitions, including extending the maturity date to June 30, 2022.

On April 30, 2021, the Company terminated its revolving line of credit agreement with the financial institution.

No advances on the line of credit had been taken by the Company through the termination date.

Team Member Benefit Plans

The Company contributes to defined c ontribution plans in a number of countries including a 401(k) savings plan for U.S.

based team members and defined contribution arrangements in the United Kingdom, Australia, New Zealand and select other countries based on the legislative and tax requirements of the respective countries.

The Company contributes to defined c ontribution plans in a number of countries including a 401(k) savings plan for U.S.-based team members and defined contribution arrangements in the United Kingdom, Australia, New Zealand and select other countries based on the legislative and tax requirements of the respective countries.

Total contributions to these plans were $ 3.9 million, $ 2.8 million and $ 1.9 million for the years ended January 31, 2023, 2022 and 2021, respectively.

In connection with the IPO, on October 18, 2021, the Company filed a restated certificate of incorporation that authorized the issuance of 1,500,000,000 shares of Class A common stock, 250,000,000 shares of Class B common stock, and 50,000,000 shares of preferred stock at $ 0.0000025 par value for each class of shares.

In connection with our initial public offering (the “IPO”), on October 18, 2021, the Company filed a restated certificate of incorporation that authorized the issuance of 1,500,000,000 shares of Class A common stock, 250,000,000 shares of Class B common stock, and 50,000,000 shares of preferred stock at $ 0.0000025 par value for each class of shares.

Common stockholders are entitled to dividends when and if declared by the board of directors.

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The holder of each share of Class A common stock is entitled to one vote and the holder of each share of Class B common stock is entitled to ten votes.

Upon consummation of the IPO, the deferred offering costs of $ 4.7 million were reclassified into stockholders’ equity as a reduction of the IPO proceeds on the consolidated balance sheets.

In addition, an entity affiliated with our founder and the CEO sold 2,500,000 shares of our Class A common stock (upon conversion of shares of Class B common stock) at the IPO.

The Company did not receive any proceeds from the sale of shares of its Class A common stock by the selling stockholder.

The Company had shares of common stock reserved for future issuance, on an as-converted basis, as follows (in thousands):

The Company had shares of common stock reserved for future issuance as follows (in thousands):

January 31, 2023 January 31, 2022

Class A and Class B common stock

Convertible preferred stock — 79,551

Options issued and outstanding 12,686 17,146

Shares available for issuance under Equity Incentive Plans 21,483 18,248

RSUs issued and outstanding 3,280 —

RSUs and PSUs issued and outstanding 8,336 3,280

Shares reserved for issuance to charitable organizations 1,636 1,636

2021 ESPP 4,303 3,271

Warrants issued and outstanding (1)

Total 48,444 43,581

______________

(1) Concurrent with the Loan and Security Agreement discussed in “Note 7.

Debt Financing”, the Company had issued warrants to the financial institution for shares of the Company’s Class B common stock at an effective

strike price of $ 1.18 per share.

The warrants were issued in two tranches that expire in Fiscal 2027 and Fiscal 2029, respectively.

The warrants were classified in equity with negligible carrying value.

On November 18, 2021, the Company received a request for the exercise of all of its warrants outstanding.

Pursuant to these exercises, the Company issued 72,772 shares of Class B common stock against the $ 0.1 million cash proceeds received.

Early Exercised Options (subject to a repurchase right)

Certain stock option holders have the right to exercise unvested options, subject to a repurchase right held by the Company at the original exercise price, in the event of voluntary or involuntary termination of employment of the holder.

As of January 31, 2022 and 2021, there were 713,967 and 1,197,150 shares, respectively, of unvested options that had been early exercised and were subject to repurchase for a total liability of $ 6.8 million and $ 8.1 million, respectively.

The liability associated with early exercised options is included in other long-term liabilities in the consolidated balance sheets.

As of January 31, 2023 and January 31, 2022 , there were 194,304 and 713,967 shares, respectively, of unvested options that had been early exercised and were subject to repurchase for a total liability of $ 1.8 million and $ 6.8 million, respectively.

The liability as sociated with early exercised options is included in other long-term liabilities in the consolidated balance sheets.

For accounting purposes, issuance of shares will be recognized only on vesting.

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Convertible Preferred Stock

Upon the closing of the IPO, all shares of the Company’s convertible preferred stock outstanding of 79.6 million were automatically converted into an equal number of shares of Class B common stock and their carrying value of $ 424.9 million was reclassified into stockholders’ equity.

As of January 31, 2022, there were no shares of convertible preferred stock issued and outstanding.

The following table summarizes the convertible preferred stock outstanding immediately prior to the conversion into common stock upon the closing of the IPO (in thousands):

Convertible Preferred Stock Shares Authorized Shares Issued and Outstanding Net Carrying Value

Series safe A1 539 539 100

Series safe A2 5,111 4,911 1,105

Series safe A3 1,600 1,600 450

Series A 12,393 12,393 3,954

Series B 21,109 20,901 19,743

Series C 12,282 12,282 21,935

Series D 12,512 12,512 109,440

Series E 14,413 14,413 268,177

Total 79,959 79,551 424,904

Upon the closing of the IPO, all 79.6 million shares of the Company’s convertible preferred stock outstanding were automatically converted into an equal number of shares of Class B common stock and their carrying value of $ 424.9 million was reclassified into stockholders’ equity.

As of January 31, 2023 and January 31, 2022, there were no shares of convertible preferred stock issued and outstanding.

Equity Incentive Plans

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All these options qualify as equity settled awards and contain no performance conditions.

In September 2021, in connection with the IPO, our board of directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to our 2015 Plan (together the “Plans”).

The 2021 Plan authorizes the award of both stock options, which are intended to qualify for tax treatment under Section 422 of the Internal Revenue Code, and nonqualified stock options, as well for the award of restricted stock awards (“RSAs”), stock appreciation rights (“SARs”), RSUs, and performance and stock bonus awards.

Pursuant to the 2021 Plan, incentive stock options may be granted only to our team

We may grant all other types of awards to our team members, directors, and consultants.

We have initially reserved 13,032,289 shares of our Class A common stock, plus any reserved shares of Class B common stock not issued or subject to outstanding grants under the 2015 Plan on the effective date of the 2021 Plan, for issuance as Class A common stock pursuant to awards granted under our 2021 Plan.

The number of shares reserved for issuance under our 2021 Plan will increase automatically on February 1 of each of the years from 2022 through 2031.

As such, effective as of February 1, 2022, 7,344,382 shares were added to the 2021 Plan.

In September 2021, in connection with the IPO, the board of directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to the Company’s 2015 Plan (together the “Plans”).

The 2021 Plan authorizes the award of both stock options, which are intended to qualify for tax

treatment under Section 422 of the Internal Revenue Code, and nonqualified stock options, as well for the award of restricted stock awards (“RSAs”), stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and stock bonus awards.

Pursuant to the 2021 Plan, incentive stock options may be granted only to the Company’s team members.

The Company may grant all other types of awards to its team members, directors, and consultants.

The Company initially reserved 13,032,289 shares of its Class A common stock, plus any reserved shares of Class B common stock not issued or subject to outstanding grants under the 2015 Plan on the effective date of the 2021 Plan, for issuance as Class A common stock pursuant to awards granted under the 2021 Plan.

The number of shares reserved for issuance under the 2021 Plan increases automatically on February 1 of each of the years from 2022 through 2031.

The awards available for grant under the above Plans for the pe riods presented were as follows (in thousands):

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Options granted — ( 7,936 )

RSUs granted ( 3,290 ) —

RSUs cancelled and forfeited 10 —

Options cancelled and forfeited 2,044 1,970

RSUs and PSUs granted ( 6,651 ) ( 3,290 )

RSUs and PSUs canceled and forfeited 657 10

Options canceled and forfeited 1,496 2,044

Options repurchased 60 92

Available at end of period

In the event that shares previously issued u nder the above Plans are reacquire d by the Company, such shares shall be added to the number of shares then available for issuance under the Plans.

In the event that an outstanding stock option for any reason expires or is canceled, the shares allocable to the unexercised portion of su ch stock option will be added to the number of shares then available for issuance under the Plans.

The 2015 Plan allows the grantees to early exercise stock options.

Stock Options and RSUs

The following table summarizes options activity under our Plans, and related information:

21,483 18,248

In the event that shares previously issued u nder the above Plans are reacquire d by the Company, such shares shall be added to the number of shares then available for issuance under the 2021 Plan.

Both Plans allow the grantees to early exercise stock options.

Stock Options, RSUs and PSUs

The following table summarizes options activity under the Plans, and related information:

Number of Stock Options Outstanding (in thousands) Weighted Average Exercise Price Weighted Average Remaining Years Aggregate Intrinsic value (in millions)

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Options exercised ( 2,862 ) 4.87 5.56

Options cancelled ( 164 ) 0.61 —

Options canceled ( 79 ) 3.79 —

Options forfeited ( 1,891 ) 5.50 —

Balances at January 31, 2021 16,043 $ 6.33 8.39 $ 166.6

16,253 $ 4.56 9.03 $ 70.6

Options granted 7,936 18.68 8.50

Options exercised ( 4,789 ) 5.40 5.07

Options cancelled ( 79 ) 3.79 —

Options canceled ( 81 ) 6.20 —

Options forfeited ( 1,963 ) 10.47 —

Balances at January 31, 2022 17,146 $ 11.83 8.24 $ 894.8

16,043 $ 6.33 8.39 $ 166.6

Options granted — —

Options exercised ( 2,964 ) 8.49

Options cancelled ( 81 ) 6.20 —

Options canceled ( 33 ) 9.46

Options forfeited ( 1,463 ) 14.52

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12,686 $ 12.30 7.00 $ 470.8

Exercisable at January 31, 2022

Options vested at January 31, 2023

7,027 $ 9.43 6.42 $ 281.0

Options expected to vest at January 31, 2022

Options vested and expected to vest at January 31, 2023

12,686 $ 12.30 7.00 $ 470.8

The aggregate grant-date fair value of options vested during the years ended January 31, 2022, 2021 and 2020 was $ 10.8 million, $ 8.2 million and $ 1.8 million, respectively.

No options were granted during the year ended January 31, 2023 and the aggregate grant-date fair value of options vested during the years ended January 31, 2023, 2022 and 2021 was $ 31.0 million, $ 10.8 million and $ 8.2 million, respectively.

The weighted-average grant-date fair value per share of options granted was $ 10.81 and $ 3.55 for the years ended January 31, 2022 and 2021, respectively.

The aggregate intrinsic value of options exercised during the years ended January 31, 2023, 2022 and 2021 was $ 123.4 million, $ 280.5 million and $ 33.8 million, respectively.

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s estimated stock price at the time of exercise and the exercise price, multiplied by the number of related in-the-money options) that would have been received by the option holders had they exercised their options at the end of the period.

During the year ended January 31, 2022, we granted 0.3 million RSUs to our team members under our 2021 Plan at $ 82.10 grant-date fair value per share.

These RSUs are grants of shares of our common stock, the vesting of which is based on the requisite service requirement.

Generally, our RSUs are subject to forfeiture and are expected to vest over two to four years ratably on a combination of bi-annual and quarterly basis.

RSUs vested or cancelled during the year ended January 31, 2022 were not material.

As of January 31, 2022 and 2021, approximately $ 101.8 million and $ 26.8 million of total unrecognized compensation cost was related to stock options and restricted stock awards granted, that is expected to be recognized over a weighted-average p eriod of 2.3 years and 1.3 years , respectively.

The aggregate intrinsic value represents the difference between the exercise price and the fair value of the underlying common stock on the date of exercise.

As of January 31, 2023 and January 31, 2022, approximately $ 46.2 million and $ 80.3 million, respectively, of total unrecognized compensation cost was related to stock options granted, that is expected to be recognized over a weighted-average period of 2.1 years and 2.7 years, respectively.

The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures.

Determining Fair Value of Stock Options

The fair value of each stock option grant was estimated on the date of grant, using a Black-Scholes option-pricing model, with the following weighted-average assumptions:

Fiscal Year Ended January 31,

2022 2021 2020

Risk-free interest rate 1.10 % 0.50 %

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Dividend yield — % — %

No options were granted during the year ended January 31, 2023.

Prior to the IPO, the Company estimated the volatility of common stock on the date of grant based on the average historical stock price volatility of comparable publicly-traded companies in the Company's industry group.

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The expected dividend yield is zero percent as the Company has not paid and does not anticipate paying dividends on common stock.

The following table summarizes the Company’s RSU activity (in thousands):

Number of Shares (1)

Balances at January 31, 2021 — $ —

Granted 272 82.11

Canceled/forfeited — —

Balances at January 31, 2022 272 $ 82.11

Granted 6,286 52.52

Vested ( 930 ) 55.01

Canceled/forfeited ( 610 ) 54.56

Balances at January 31, 2023

5,018 $ 53.33

(1) The table above does not include 3 million RSUs issued to the Company’s founder and the CEO described below.

These RSUs are grants of shares of the Company’s common stock, the vesting of which is based on the requisite service requirement.

Generally, the Company’s RSUs are subject to forfeiture and are expected to vest over two to four years ratably on a combination of bi-annual and quarterly basis.

As of January 31, 2023 and January 31, 2022, approximately $ 254.8 million and $ 21.5 million, respectively, of total unrecognized compensation cost was related to restricted stock units granted to

team members other than the CEO, that is expected to be recognized over a weighted-average period of 3.2 years and 3.9 years, respectively.

The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures.

In June 2022, the Company granted 0.4 million PSUs to senior members of its management team subject to revenue performance condition and service conditions.

The number of awards granted represents 100 % of the target goal;

under the terms of the awards, the recipient may earn between 0 % and 200 % of the original grant.

The performance condition is set to be achieved in fiscal 2025 and the service condition in the calendar year 2025.

The Company recorded $ 1.6 million of stock-based compensation expense related to PSUs during the year ended January 31, 2023.

As of January 31, 2023, unrecognized stock-based compensation expense related to these PSUs was $ 7.4 million to be recognized over a period of 2.9 years.

CEO Performance Award

In May 2021, the Company granted 3 million RSUs tied to our Class B common stock to Mr.

Sijbrandij, our founder and the CEO, with an estimated aggregate grant date fair value of $ 8.8 million, estimated utilizing a Monte Carlo valuation model.

The model assumed a share price volatility of 45 % and a risk free rate of 1.52 %.

The RSUs contain a service condition and a performance condition based on the achievement of eight separate stock price hurdles/tranches ranging from $ 95 to $ 500 per share on a recognized stock exchange or a per share price received in a corporate transaction defined in the grant.

The price hurdles will adjust for stock splits, recapitalizations, and the like.

Provided that Mr.

Sijbrandij continues to be the CEO of the Company, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock price hurdles are achieved.

We will recognize total stock-based compensation expense of $ 8.8 million over the requisite service period of each tranche, which ranged from 2.83 to 7.50 years, using the accelerated attribution method.

If the stock price hurdles are met sooner than the derived service period, the Company will adjust the stock-based compensation expense to reflect the cumulative expense associated with the vested portion of these RSUs.

The Company recorded $ 1.2 million of stock-based compensation expense related to the CEO RSUs during the year ended January 31, 2022.

As of January 31, 2022, unrecognized stock-based compensation expense related to these RSUs was $ 7.6 million which will be recognized over the remaining derived service period of the respective tranches.

2021 Employee Stock Purchase Plan (“ESPP”)

In September 2021, our board of directors and our stockholders approved our 2021 Employee Stock Purchase Plan (“ESPP”) to enable eligible team members to purchase shares of our Class A common stock with accumulated payroll deductions and provides a 15 % purchase price discount of the fair market value of the Company’s Class A common stock on the enrollment date or purchase date, whichever is lower, as well as up to a 27-month look-back period.

We have initially reserved 3,271,090 shares of our Class A common stock for is suance and sale under our 2021 ESPP with automatic increase on February 1 for the first ten calendar years.

As such, effective as of February 1, 2022, 1,468,876 shares of our Class A common stock were added to our 2021 ESPP.

The following table summarizes the weighted-average assumptions used in estimating the fair value of the ESPP for the initial offering period using the Black-Scholes option-pricing model:

Fiscal Year Ended January 31,

In May 2021, the Company granted 3 million RSUs tied to its Class B common stock to Mr.

Sijbrandij, the Company’s co-founder and CEO, with an estimated aggregate grant date fair value of $ 8.8 million.

The Company recorded $ 1.7 million and $ 1.2 million of stock-based compensation expense related to the CEO RSUs during the years ended January 31, 2023 and 2022, respectively.

As of January 31, 2023, unrecognized stock-based compensation expense related to these RSUs was $ 5.9 million which will be recognized over the remaining derived service period of the respective tranches which ranges from 2 to 7 years.

2021 Employee Stock Purchase Plan

In September 2021, the Company’s board of directors and its stockholders approved the ESPP to enable eligible team members to purchase shares of the Company’s Class A common stock with accumulated payroll deductions and provides a 15 % purchase price discount of the fair market value of the Company’s Class A common stock on the IPO date or purchase date, whichever is lower.

The ESPP also provides up to a 27-month look-back period with four purchase dates in May and November of each year, and the first purchase occurred in May 2022.

If the closing price of the Company’s Class A common stock on the first day of the current offering period is higher than the price on the last day of any applicable purchase period, the ESPP requires the price to be reset based on the lower fair market value and the offering period to be rolled over for a new period of 24 months.

During fiscal 2023, this reset and rollover was triggered only on the May 31, 2022 purchase date.

The original offering period commencing on the IPO date through November 30, 2023 was modified to a new offering period commencing June 1, 2022 through May 31, 2024 and the ESPP price was reset based on the closing price of the Company’s Class A common stock on May 31, 2022.

In accordance with ASC 718, Stock-Based Compensation , the modification in respect of the reset of the ESPP price and rollover resulted in an incremental charge of stock-based compensation expense of $ 2.8 million during the year ended January 31, 2023.

The remaining modification charge of $ 6.2 million will be recognized over the remainder of the new offering period.

The following table summarizes assumptions used in estimating the fair value of the ESPP for the offering period in effect using the Black-Scholes option-pricing model:

Fiscal Year Ended January 31, Fiscal Year Ended January 31,

Risk-free interest rate 1.62 % - 4.55 %

Weighted-average volatility 38.47 %

Weighted-average expected term (in years) 0.57

0.07 % - 0.17 %

Volatility 44.95 % - 55.19 %

38.47 % - 41.75 %

Expected term (in years) 0.50 - 2.00

Dividend yield — % — %

The Company record ed $ 5.1 million of stock-based compensation expense related to the ESPP during the year ended January 31, 2022.

The Company record ed $ 25.7 million and $ 5.1 million of stock-based compensation expense related to the ESPP during the years ended January 31, 2023 and 2022 , respectively.

As of January 31, 2023, approximately $ 21.1 million of total unrecognized compensation cost was related to the ESPP that is expected to be recognized over 1.8 years.

As of January 31, 2023 , the Company issued 0.4 million shares of Class A common stock to team members through the ESPP.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense (excluding th e expense related to the tender offers - “Note 13.

Related Party Transactions”) as follows (in thousands):

The Company recognized stock-based compensation expense as follows (in thousands):

Fiscal Year Ended January 31,

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General and administrative 33,163 9,854 57,638

Total stock-based compensation expense, excluding tender offers $ 29,665 $ 8,024 $ 3,702

The tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was $ 7.0 million for the year ended January 31, 2022 and no t material for the years ended January 31, 2021 and 2020.

Joint Venture and Majority Owned Subsidiary

Total stock-based compensation expense (1) (2)

$ 122,567 $ 30,009 $ 111,846

(1) The table above includes stock-based compensation of JiHu.

Refer to “Note 11.

Joint Venture and Equity Method Investment” for further discussion.

(2) The table above includes stock-based compensation related to the tender offers.

The Company recognized $ 0.3 million and $ 103.3 million of incremental stock-based compensation expense related to the tender offers for fiscal 2022 and 2021 , respectively .

The corporate income tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was $ 7.7 million and $ 7.0 million for the years ended January 31, 2023 and 2022, respectively, and no t material for the year ended January 31, 2021.

Joint Venture and Equity Method Investment

Joint Venture

In February 2021, the Company along with Sequoia CBC Junyuan (Hubei) Equity Investment Partnership (Limited Partnership) and Suzhou Gaocheng Xinjian Equity Investment Fund Partnership (Limited Partnership) executed an investment agreement (the “Investment Agreement”) to establish GitLab Information Technology (Hubei) Co., LTD (“JiHu”), a legal entity in the People’s Republic of China.

This new company offers a dedicated distribution of GitLab’s DevOps platform available as both a self-managed and SaaS offering (GitLab.cn) that is available only in mainland China, Hong Kong and Macau.

The Company contributed an intellectual property license in exchange for a 72.25 % equity stake in JiHu and the other two unrelated investors contributed cash in exchange for the remaining equity stake, for a combined interest of $ 80 million.

The term of the Investment Agreement is 50 years unless extended by mutual consent or terminated earlier upon certain specified events.

While the Company has disproportionately few voting rights in JiHu pursuant to the Investment Agreement given its 72.25 % equity interest, the Company has entered into a license agreement and a technical services agreement with JiHu which when evaluated on a collective basis enables the Company to direct the activities that most significantly affect the economic performance of JiHu.

Further, the Company has the obligation to absorb losses and the right to receive benefits of JiHu that could potentially be significant to JiHu.

Therefore, the Company accounted for JiHu as a variable interest entity and consolidated the entity in accordance with ASC Topic 810, Consolidation .

The Company recorded the 27.75 % ownership interest of remaining investors as a noncontrolling interest on its consolidated balance sheet.

The assets of JiHu can be used only to settle obligations of JiHu and creditors of JiHu do not have recourse against the general credit of the Company.

JiHu is primarily financed through equity and has no financial borrowings.

Selected financial information of JiHu, post inter-company eliminations, is as follows (in thousands):

The Company accounted for JiHu as a variable interest entity and consolidated the entity in accordance with ASC Topic 810, Consolidation .

On March 29, 2022, JiHu closed its Series A-1 round of common stock financing where investors contributed $ 27.7 million, net of issuance costs.

On July 1, 2022, JiHu closed its Series A-2 round of common stock financing where investors contributed $ 22.8 million, net of issuance costs.

On September 7, 2022, JiHu closed its Series A-3 round of financing with an external investor who contributed $ 4.1 million, net of issuance costs.

The Company accounted for these funding events as equity transactions with the carrying amount of the non-controlling interest adjusted to reflect the change in the ownership interest in JiHu, and the difference was recognized in the Company’s additional paid-in capital.

Subsequent to the closing of the rounds, the Company retains control over JiHu with its equity stake reduced from 72 % to 55 %.

In March 2022, one of the potential investors who could not participate in the Series A-1 financing round provided a $ 2.9 million loan to JiHu as an advance pending a capital contribution.

The loan was repayable within ten business days of receipt of capital contribution from the investor.

JiHu received an equity contribution from this investor during the Series A-2 round and repaid the loan in full in July 2022.

During the year ended January 31, 2023, the board of directors of JiHu approved an employee stock option plan (“JiHu ESOP”) for its employees.

During the year ended January 31, 2023, the Company recognized $ 7.8 million of stock-based compensation expense related to JiHu ESOP, respectively.

As of January 31, 2023, approximately $ 14.5 million of total unrecognized compensation cost was related to the JiHu ESOP that is expected to be recognized over 3.2 years.

Any such dilution will be accounted for as an equity transaction.

Operating Leases

The Company recognized $ 0.6 million, $ 0.2 million and zero of operating lease expense during the year ended January 31, 2023, 2022 and 2021 , respectively.

The Company has non-cancelable operating leases maturing over the next two years with total lease payments of $ 1.2 million and total present value of lease liabilities of $ 1.1 million .

The table below presents supplemental information related to operating leases for the year ended January 31, 2023 (in thousands, except weighted-average information):

Weighted-average remaining lease term (in years) 1.30

Weighted-average discount rate 3.70 %

Right-of-use assets obtained in exchange for new operating lease liabilities $ 515

Cash paid for amounts included in the measurement of lease liabilities

Selected financial information

Selected financial information of JiHu, post intercompany eliminations, is as follows (in thousands):

Fiscal Year Ended January 31,

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Cost of revenue 1,731 945

Gross profit 292

Gross profit (loss) 3,012 292

Operating expenses:

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Loss from operations ( 21,991 ) ( 8,796 )

Interest income 659 —

Other income, net 1,633 67

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Net loss attributable to noncontrolling interest $ ( 8,385 ) $ ( 2,422 )

January 31, 2022

January 31, 2023 January 31, 2022

Cash and cash equivalents $ 56,744 $ 14,198

Property and equipment, net 1,135 769

Operating lease right-of-use assets 998 —

Other assets 3,950 2,765

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Total liabilities $ 8,871 $ 3,663

Equity Method Investment

In April 2021, the Company reorganized Meltano Inc.

(“Meltano”), which started as an internal project within GitLab in July 2018, into a separate legal entity.

The entity was funded by GitLab's contribution of intellectual property with the fair value of approximately $ 0.4 million and a preferred stock financing from third parties of $ 4.2 million, representing 12 % ownership on a fully diluted basis.

Even after the preferred stock financing, the Company is the largest shareholder with majority voting rights.

Meltano is considered a majority owned subsidiary of the Company and consolidated in accordance with ASC Topic 810, Consolidation.

The Company recorded the preferred stock funding and unvested stock options as noncontrolling interest on its consolidated balance sheet.

(“Meltano”), which started as an internal project within the Company in July 2018, into a separate legal entity.

The entity was funded by the Company’s contribution of intellectual property with the fair value of approximately $ 0.4 million and a preferred stock financing from third parties of $ 4.2 million, representing 12 % ownership on a fully diluted basis.

On April 4, 2022, Meltano closed its Series Seed-2 round of preferred stock financing and raised $ 7.2 million.

Pursuant to this transaction, the board composition of Meltano changed and the Company no longer has the power to appoint the majority of the board of directors of Meltano.

Consequently, despite having majority voting rights at the stockholder level, the Company no longer has control over Meltano.

The loss of control of a majority owned subsidiary resulted in the deconsolidation of net assets of $ 9.4 million and non-controlling interest of Meltano of $ 11.3 million, recognition of retained interest at fair value of $ 15.9 million , and a gain of $ 17.8 million recorded in other income (expense), net during the year

ended January 31, 2023 .

The fair value of retained interest was determined using Option Pricing Model (“OPM”) Backsolve approach based on the most recent funding round of preferred stock.

As of the date of the loss of control, the basis difference between the fair value of investment in Meltano and the Company’s share in the net assets of Meltano was attributed to equity method goodwill.

Effective April 4, 2022, the Company accounts for this investment under the equity method and has recorded $ 12.7 million in “equity method investment” on its consolidated balance sheet as of January 31, 2023.

During the year ended January 31, 2023, the Company recognized a loss from equity method investment of $ 2.5 million, net of tax on the consolidated statements of operations.

As of January 31, 2023, the Company owns 96 % of the common stock in Meltano.

As of January 31, 2023, Meltano has 3.5 million employee stock options and 3.1 million shares of preferred stock outstanding that are potentially dilutive equity instruments and will result in dilution to 46 % in the Company’s stake in Meltano once all these instruments get converted into common stock of Meltano.

The components of total income (loss) from continuing operations before income taxes are as follows (in thousands):

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Stock-based compensation ( 0.4 ) 5.0 ( 7.3 )

Non-deductible Executive Compensation ( 1.6 ) ( 0.5 ) —

Research tax credit 2.7 1.0 0.2

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Acquired intangibles ( 863 ) ( 1,389 )

Equity Method Investment ( 2,892 ) —

Fixed Assets ( 499 ) —

Other ( 189 ) —

Net deferred tax liabilities $ ( 849 ) $ ( 379 )

Under the provisio ns of ASC 740, Income Taxes , the determination of the Company’s ability to recognize its deferred tax asset requires an assessment of both negative and positive evidence when determining the Company’s ability to recognize its deferred tax assets.

The Company determined that it was not more likely than not that the Company could recognize its deferred tax assets.

Evidence evaluated by the Company included operating results during the most recent three-year period and future projections, with more weight given to historical results than expectations of future profitability, which are inherently uncertain.

Under the provisions of ASC 740, Income Taxes , the determination of the Company’s ability to recognize its deferred tax asset requires an assessment of both negative and positive evidence when determining the Company’s ability to recognize its deferred tax assets.

The Company determined that it was not more likely than not that the Company could recognize certain deferred tax assets.

The evidence evaluated by the Company included operating results during the most recent three-year period and future

projections, with more weight given to historical results than expectations of future profitability, which are inherently uncertain.

Certain entities’ net losses in recent periods represented sufficient negative evidence to require a valuation allowance against its net deferred tax assets.

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The increase of $ 43.6 million in the valuation allowance for the year ended January 31, 2023 is primarily due to net operating losses generated during the year.

As of January 31, 2022, the Company recorded $ 0.4 million of deferred tax liabilities, net.

The Company does not have any deferred tax assets for which subsequently recognized tax benefits will be credited directly to contributed capital.

As of January 31, 2023, the Company recorded $ 0.8 million of deferr ed tax liabilities, net.

The Company has not recorded a provision for deferred U.S.

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As of January 31, 2023, the Company had federal net operating loss carryforwards of approximately $ 2.3 million, state net operating loss carryforwards of approximately $ 87.7 million and foreign net operating loss carryforwards of approximately $ 539.9 million.

All of the federal net operating loss carryforwards are carried over from an entity acquired in the current fiscal year.

All of the federal net operating loss carryforwards are carried over from an entity acquired in the previous fiscal year.

The federal net operating loss carryforwards do not expire as they were generated post Tax Cuts and Jobs Act, where net operating losses generated after December 31, 2017 do not expire.

state net operating loss carryforwards,

if not utilized, will begin to expire on various dates beginning in 2035, and will continue to expire through 2041.

The foreign net operating loss carryforwards can be carried forward indefinitely.

state net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2032.

The foreign net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2027.

In addition, the Company has research tax credit carryforwards of approximately $ 4.2 million for federal purposes.

Federal Research & Experimentation (R&E) credit, if not utilized, will expire in 2042.

Federal Research & Experimentation (R&E) credit, if not utilized, will begin to expire in 2042.

The Company also has research tax credit carryforwards of approximately $ 1.4 million for U.S.

state purposes, which do not expire.

state purposes, which if not utilized, will begin to expire in 2030.

Pursuant to the U.S.

Internal Revenue Code, the net operating loss and R&E credit could be subject to limitation should the Company experience an owner shift of greater than 50 percent over a three-year period;

however this limitation is immaterial.

Internal Revenue Code, the Net Operating Loss and R&E credit could be subject to limitation should the Company experience an owner shift of greater than 50 percent over a 3 year period;

however at this time, the effect of this limitation is immaterial.

Uncertain Tax Positions

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federal 2018 through 2021 tax years were open and subject to potential examination in one or more jurisdictions.

In addition, in the U.S., any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination.

In addition, in the United States, any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination.

The Company is currently under examination in the Netherlands for tax years 2015 and 2016.

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The Company continues to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.

Governments in certain countries where the Company does business have enacted legislation in response to the COVID-19 pandemic, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act) enacted by the United States on March 27, 2020.

The Company is continuing to analyze these legislative developments which are not material for the period ended January 31, 2022 .

As of January 31, 2023, unrecognized tax benefits approxim ated $ 7.5 million, of which $ 0.5 million would affect the effective tax rate if recognized.

As of January 31, 2022, unrecognized tax benefits approximated $ 5.6 million, of which $ 0.8 million would affect the effective tax rate if recognized.

The Company does not anticipate any of the unrecognized tax benefits to reverse in the next 12 months.

The Company did not have unrecognized tax benefits in fiscal year 2021 and 2020.

The reconciliation of the Company's unrecognized tax benefits for the year ended January 31, 2022 is as follows (in thousands):

Total unrecognized tax benefits at February 1, 2021 $ —

The Company anticipates an immaterial amount of unrecognized tax benefits to reverse in the next 12 months.

The reconciliation of the Company's unrecognized tax benefits is as follows (in thousands):

Beginning balance $ 5,557 $ —

Gross increases and decreases due to tax positions taken in prior periods 685 4,076

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Gross increases and decreases due to lapses in applicable statutes of limitations ( 151 ) —

Total unrecognized tax benefits at January 31, 2022

Ending balance $ 7,460 $ 5,557

It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes.

For the years ended January 31, 2022 , 2021 and 2020, the Company recognized interest and penalties of $ 0.1 million, zero and zero , respectively.

For the years ended January 31, 2023, 2022 and 2021, the Company recognized interest and penalties of $ 0.2 million, $ 0.1 million and zero , respectively.

Net Loss per Share

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Net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted $ ( 1.16 ) $ ( 1.95 ) $ ( 3.82 )

Since we were in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares

outstanding would have been anti-dilutive.

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in thousands):

January 31, 2022 January 31, 2021

January 31, 2023 January 31, 2022 January 31, 2021

Shares subject to outstanding common stock options 12,686 17,146 16,043

Unvested RSUs in connection with business combination 16 —

Unvested restricted stock in connection with business combination 8 16 —

Unvested early exercised stock options 194 714 1,510

Convertible preferred stock (on an if-converted basis) — 79,551

Unvested RSUs and PSUs 8,336 3,264 —

Shares subject to the 2021 ESPP 81 256 —

Convertible preferred stock (on an if-converted basis) — — 79,551

Warrants — — 73

21,305 21,396 97,177

Related Party Transactions

In December 2020, the Company’s board of directors facilitated a tender offer which allowed the Company’s current and former team members and founders to sell ordinary shares and vested options to a set of existing investors.

These investors purchased 3,887,156 ordinary shares, 408,211 preferred shares, and 556,816 vested options for a total purchase price of $ 194.1 million.

The fair value was $ 16.71 per share/vested option and the transaction price was $ 40.00 per ordinary share/vested option.

The Company recorded $ 103.3 million incremental stock-based compensation expense in the consolidated statements of operations for fiscal 2021.

In connection with the above tender offer, d uring the year ended January 31, 2022 , the Company repurchased 13,000 shares of Class B common stock from certain team members (ineligible to participate in the original fiscal 2021 tender offer) of vested stock options for an aggregate amount of $ 0.6 million.

The excess of the transaction price over the fair value of the instruments repurchased has been recognized as additional stock-based compensation expense of $ 0.3 million.

Shares repurchased have

been retired and deducted from common stock for par value and from additional paid in capital for the excess over par value.

Total stock-based compensation expense related to the above-mentioned tender offers included in the consolidated statements of operations was as follows (in thousands):

Fiscal Year Ended January 31,

2022 2021 2020

Cost of revenue $ — $ 878 $ 231

Sales and marketing 344 18,362 2,887

Research and development — 28,916 10,165

General and administrative — 55,666 23,887

Total stock-based compensation expense related to tender offers $ 344 $ 103,822 $ 37,170

Commitments and Contingencies

Hosting Infrastructure Commitments

In September 2020, the Company entered into non-cancelable capacity commitments with a hosting infrastructure vendor for a total minimum service commitment of $ 97.0 million over a five year period.

We expect to meet this minimum commitment by the end of fiscal year 2024.

Future hosting infrastructure minimum commitments are as follows as of January 31, 2022 (in thousands):

Contractual Obligations and Commitments

The Company’s contractual commitments relate mainly to third-party non-cancelable hosting infrastructure agreements and subscription arrangements used in the ordinary course of business.

Future minimum payments under the Company’s non-cancelable purchase commitments as of January 31, 2023 were as follows (in thousands):

Total Less than 1 Year 1-3 Years

Purchase commitments (1)

$ 216,948 $ 112,911 $ 104,037

(1) The table above includes $ 126 million of remaining non-cancelable contractual commitments as of January 31, 2023 related to one of the Company’s hosting infrastructure vendors, under which the Company committed to spend an aggregate of at least $ 171 million between October 2020 and September 2025.

Loss Contingencies

In accordance with ASC 450, Loss Contingencies, the Company accrues for contingencies when losses become probable and reasonably estimable.

If applicable, the Company accrues receivables for probable insurance or other third-party recoveries.

Accordingly, the Company has recorded an estimated liability related to certain labor matters regarding its use o f contractors in certain foreign countries.

As of January 31, 2022 and 2021, the estimated liability relating to these matters was $ 2.6 million and $ 2.3 million, respectively.

As of January 31, 2023 and January 31, 2022 , the estimated liability relating to these matters w as $ 2.5 million and $ 2.6 million, respectively.

Warranties and Indemnifications

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In connection with the service level agreements, the Company has not incurred any significant costs and has not accrued any liabilities in the consolidated financial statements.

In the ordinary course of business, the Company enters into contractual arrangements under which the Company agrees to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from the Company’s platform or the Company’s acts or omissions.

In the ordinary course of business, the Company enters into contractual arrangements under which the Company agrees to provide indemnification of varying scope and terms to business partners and

other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from the Company’s platform or the Company’s acts or omissions.

In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract.

Further, the Company’s obligations under these agreements may be

limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments.

Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments.

In addition, the Company has agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines, and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request.

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Legal Proceedings

We are, and from time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.

We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, financial condition or operating results.

The Company is, and from time to time, may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business.

The Company is not presently a party to any legal proceedings that in the opinion of management, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, financial condition or operating results.

Defending such proceedings is costly and can impose a significant burden on management and team members.

The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

Subsequent Events

On March 29, 2022, JiHu closed its Series A-1 round of financing.

Investors contributed in the aggregate approximately $ 29.0 million and subsequent to the closing, the Company retains control over JiHu.

On April 4, 2022, Meltano closed its Series Seed-2 round of financing.

Investors contributed in the aggregate approximately $ 8.2 million and subsequent to the closing, the Company retains control over Meltano.

Reduction in Force (“RIF”)

In the first quarter of fiscal year 2024, the Company announced a plan to reduce its global headcount by approximately 7 % of the total headcount, following a review of the Company’s business structure and after taking other cost-cutting measures to reduce expenses.

As a result of the above plan, the Company recognized total restructuring charges of approximately $ 9.0 million in the first quarter of fiscal year 2024, which consisted primarily of one-time severance and other termination benefit costs of $ 7.5 million, as well as accelerated stock-based compensation directly related to this reduction in force of $ 1.5 million.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data