Gitlab Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Regist ered Public Accounting Firm ( KPMG LLP , Pittsburgh, PA , Auditor Firm ID: 185 ) 84 Consolidated Balance Sheets 89 Consolidated Statements of Operations 90 Consolidated Statements of Comprehensive Loss 91 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equit y (Deficit) 92 Consolidated Statements of Cash Flows 94 Notes to Consolidated Financial Statements 96 83 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors GitLab Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of GitLab Inc. and subsidiaries (the Company) as of January 31, 2024 and January 31, 2023, 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, 2024, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2024 and January 31, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 2024, in conformity with U.S. 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, 2024, 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 25, 2024 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. 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 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. 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. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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. Evaluation of standalone selling prices (SSPs) for self-managed subscription and self-managed license performance obligations 84 Table of Contents As discussed in Note 3 to the consolidated financial statements, the Company recognized self-managed subscription revenue and self-managed license revenue of $355.7 million and $63.1 million, respectively, for the year ended January 31, 2024. 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 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. Evaluation of Unrecognized Tax Positions As discussed in Note 13 to the consolidated financial statements, the Company is involved in bilateral advance pricing agreement (BAPA) negotiations between the United States Internal Revenue Service (IRS) and the Dutch Tax Authority (DTA) relating to the Company’s transfer pricing arrangements between the United States and the Netherlands. The proposed agreements between the Company, the IRS, and the DTA related to these transfer pricing arrangements have not been finalized. As of January 31, 2024, the Company recorded net tax expense of $254.9 million, which represented the unrecognized tax benefit related to the BAPA and the Company’s best estimate of the tax expense associated with the proposed agreements and their related effects. We identified the evaluation of the Company’s unrecognized tax benefit related to the BAPA as a critical audit matter. Complex auditor judgment and specialized skills and knowledge were required to evaluate the Company’s interpretation of the applicable tax laws and regulations and its analysis of the recognition and measurement of its tax position related to transfer pricing. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s unrecognized tax benefits process, including controls related to 1) interpreting tax law, 2) evaluating which tax positions are more likely than not to be sustained when the BAPA negotiations are finalized, and 3) the measurement of the potential benefit to be realized. We involved tax professionals with specialized skill and knowledge, who assisted in evaluating: 85 Table of Contents • the Company’s communication with the relevant tax authorities to gain an understanding of the relevant facts • the Company’s interpretation of applicable tax laws and judgments about the administrative practices of the relevant tax authorities, and the potential impact on the unrecognized tax benefit related to the BAPA • the measurement of the potential benefit to be realized and related interest and penalties. /s/ KPMG LLP We have served as the Company’s auditor since 2019. Pittsburgh, Pennsylvania March 25, 2024 86 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors GitLab Inc.: 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, 2024, 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 weakness, 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, 2024, 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, 2024 and January 31, 2023, 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, 2024, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated March 25, 2024 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. A material weakness was identified and included in management's assessment related to the ineffective design and maintenance of effective controls over certain information technology ("IT") general controls for information systems related to the revenue process. The ineffective design and operation of IT general controls resulted in the ineffective operation of automated controls and manual controls using reports and information from the impacted information systems used in the financial reporting processes related to revenue. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 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. 87 Table of Contents 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. /s/ KPMG LLP Pittsburgh, Pennsylvania March 25, 2024 88 Table of Contents GitLab Inc. Consolidated Balance Sheets (in thousands, except per share data) January 31, 2024 (1) January 31, 2023 (1) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 287,996 $ 295,402 Short-term investments 748,289 641,249 Accounts receivable, net of allowance for doubtful accounts of $ 673 and $ 1,564 as of January 31, 2024 and January 31, 2023, respectively 166,731 130,479 Deferred contract acquisition costs, current 32,300 26,505 Prepaid expenses and other current assets 45,601 24,327 Total current assets 1,280,917 1,117,962 Property and equipment, net 2,954 5,797 Operating lease right-of-use assets 405 998 Equity method investment, net of impairment of $ 8,858 and $ 0 as of January 31, 2024 and January 31, 2023, respectively — 12,682 Goodwill 8,145 8,145 Intangible assets, net 1,733 3,901 Deferred contract acquisition costs, non-current 19,317 15,628 Other non-current assets 4,390 4,087 TOTAL ASSETS $ 1,317,861 $ 1,169,200 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 1,738 $ 5,184 Accrued expenses and other current liabilities 286,178 25,954 Accrued compensation and benefits 35,809 20,776 Deferred revenue, current 338,348 254,382 Total current liabilities 662,073 306,296 Deferred revenue, non-current 23,794 28,355 Other non-current liabilities 14,060 9,824 TOTAL LIABILITIES 699,927 344,475 Commitments and contingencies (Note 15) STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.0000025 par value; 50,000 shares authorized as of January 31, 2024 and January 31, 2023; no shares issued and outstanding as of January 31, 2024 and January 31, 2023 — — Class A Common stock, $ 0.0000025 par value; 1,500,000 shares authorized as of January 31, 2024 and January 31, 2023; 114,670 and 94,655 shares issued and outstanding as of January 31, 2024 and January 31, 2023, respectively — — Class B Common stock, $ 0.0000025 par value; 250,000 shares authorized as of January 31, 2024 and January 31, 2023; 42,887 and 56,489 shares issued and outstanding as of January 31, 2024 and January 31, 2023, respectively — — Additional paid-in capital 1,718,661 1,497,373 Accumulated deficit ( 1,149,822 ) ( 725,648 ) Accumulated other comprehensive income (loss) 2,335 ( 705 ) Total GitLab stockholders’ equity 571,174 771,020 Noncontrolling interests 46,760 53,705 TOTAL STOCKHOLDERS’ EQUITY 617,934 824,725 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,317,861 $ 1,169,200 ___________ (1) As of January 31, 2024 and January 31, 2023, the consolidated balance sheet includes assets of the consolidated variable interest entity, GitLab Information Technology (Hubei) Co., LTD (“JiHu”), of $ 47.6 million and $ 62.8 million, respectively, and liabilities of $ 6.1 million and $ 8.9 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 genera l credit of the Company. Refer to “Note 12. Joint Venture and Equity Method Investment” for further discussion. The accompanying notes are an integral part of these consolidated finan cial statements. 89 Table of Contents GitLab Inc. Consolidated Statements of Operations (in thousands, except per share data) Fiscal Year Ended January 31, 2024 2023 2022 Revenue: Subscription—self-managed and SaaS $ 506,306 $ 369,349 $ 226,163 License—self-managed and other 73,600 54,987 26,490 Total revenue 579,906 424,336 252,653 Cost of revenue: Subscription—self-managed and SaaS 45,486 40,841 23,668 License—self-managed and other 14,222 10,839 6,317 Total cost of revenue 59,708 51,680 29,985 Gross profit 520,198 372,656 222,668 Operating expenses: Sales and marketing 356,393 309,992 190,754 Research and development 200,840 156,143 97,217 General and administrative 150,405 117,932 63,654 Total operating expenses 707,638 584,067 351,625 Loss from operations ( 187,440 ) ( 211,411 ) ( 128,957 ) Interest income 39,114 14,496 736 Other income (expense), net ( 11,826 ) 21,585 ( 30,850 ) Loss before income taxes and loss from equity method investment ( 160,152 ) ( 175,330 ) ( 159,071 ) Loss from equity method investment, net of tax ( 3,824 ) ( 2,468 ) — Provision for (benefit from) income taxes 264,057 2,898 ( 1,511 ) Net loss $ ( 428,033 ) $ ( 180,696 ) $ ( 157,560 ) Net loss attributable to noncontrolling interest ( 3,859 ) ( 8,385 ) ( 2,422 ) Net loss attributable to GitLab $ ( 424,174 ) $ ( 172,311 ) $ ( 155,138 ) Net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted $ ( 2.75 ) $ ( 1.16 ) $ ( 1.95 ) Weighted-average shares used to compute net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted 154,283 148,407 79,755 The accompanying notes are an integral part of these consolidated financial statements. 90 Table of Contents GitLab Inc. Consolidated Statements of Comprehensive Loss (in thousands) Fiscal Year Ended January 31, 2024 2023 2022 Net loss $ ( 428,033 ) $ ( 180,696 ) $ ( 157,560 ) Foreign currency translation adjustments ( 4,122 ) ( 5,874 ) 27,639 Net change in unrealized gains (losses) on available-for-sale securities 5,000 ( 4,855 ) — Comprehensive loss including noncontrolling interest $ ( 427,155 ) $ ( 191,425 ) $ ( 129,921 ) Net loss attributable to noncontrolling interest ( 3,859 ) ( 8,385 ) ( 2,422 ) Foreign currency translation adjustments attributable to noncontrolling interest ( 2,162 ) ( 2,300 ) 375 Comprehensive loss attributable to noncontrolling interest ( 6,021 ) ( 10,685 ) ( 2,047 ) Comprehensive loss attributable to GitLab $ ( 421,134 ) $ ( 180,740 ) $ ( 127,874 ) The accompanying notes are an integral part of these consolidated financial statements. 91 Table of Contents GitLab Inc. Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (in thousands) 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 (Deficit) Shares Amount Shares Amount Shares Amount Balance at January 31, 2021 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 Conversion of Class B common stock to Class A common stock by the selling stockholder (CEO) upon initial public offering — — 2,500 — ( 2,500 ) — — — — — — Issuance of common stock upon initial public offering, net of underwriting discounts and other offering costs — — 8,940 — — — 649,845 — — — 649,845 Conversion of Class B common stock to Class A common stock — — 14,550 — ( 14,550 ) — — — — — — Issuance of common stock in connection with business combination, net — — — — 26 — 959 — — — 959 Contingent stock consideration in connection with business combination — — — — — — 1,754 — — — 1,754 Repurchase of common stock — — — — ( 13 ) — ( 590 ) — — — ( 590 ) Issuance of common stock related to vested exercised stock options — — — — 4,118 — 19,408 — — — 19,408 Issuance of common stock related to early exercised stock options, net of repurchases — — — — 574 — — — — — — Vesting of early exercised stock options — — — — — — 7,212 — — — 7,212 Warrant exercised — — — — 73 — 86 — — — 86 Stock-based compensation expense — — — — — — 30,009 — — — 30,009 Capital contributions from noncontrolling interest holders — — — — — — — — — 26,450 26,450 Foreign currency translation adjustments — — — — — — — — 27,639 375 28,014 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 Change in noncontrolling interest ownership — — — — — — 18,153 — — 43,573 61,726 Deconsolidation of Arch, formerly Meltano — — — — — — — — — ( 11,342 ) ( 11,342 ) Other comprehensive loss — — — — — — — — ( 8,429 ) ( 2,300 ) ( 10,729 ) Net loss — — — — — — — ( 172,311 ) — ( 8,385 ) ( 180,696 ) Balances at January 31, 2023 — $ — 94,655 $ — 56,489 $ — $ 1,497,373 $ ( 725,648 ) $ ( 705 ) $ 53,705 $ 824,725 Conversion of Class B common stock to Class A common stock — — 16,995 — ( 16,995 ) — — — — — — Issuance of common stock related to vested exercised stock options — — — — 3,406 — 32,448 — — — 32,448 Issuance of common stock under employee stock purchase plan — — 417 — — — 12,933 — — — 12,933 Repurchases, net of early exercised stock options — — — — ( 13 ) — — — — — — Issuance of common stock related to RSUs vested, net of tax withholdings — — 2,372 — — — — — — — — Charitable donation of common stock — — 231 — — — 10,700 — — — 10,700 Vesting of early exercised stock options — — — — — — 1,234 — — — 1,234 Stock-based compensation expense — — — — — — 164,515 — — ( 1,466 ) 163,049 Change in noncontrolling interest ownership — — — — — — ( 542 ) — — 542 — 92 Table of Contents Other comprehensive income (loss) — — — — — — — — 3,040 ( 2,162 ) 878 Net loss — — — — — — — ( 424,174 ) — ( 3,859 ) ( 428,033 ) Balances at January 31, 2024 — $ — 114,670 $ — 42,887 $ — $ 1,718,661 $ ( 1,149,822 ) $ 2,335 $ 46,760 $ 617,934 The accompanying notes are an integral part of these consolidated financial statements. 93 Table of Contents GitLab Inc. Consolidated Statements of Cash Flows (in thousands) Fiscal Year Ended January 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss, including amounts attributable to noncontrolling interest $ ( 428,033 ) $ ( 180,696 ) $ ( 157,560 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock-based compensation expense 163,049 122,567 30,009 Gain from the fair value change of acquisition related contingent consideration — ( 1,722 ) — Charitable donation of common stock 10,700 — — Amortization of intangible assets 2,167 2,362 665 Depreciation expense 4,368 3,231 543 Amortization of deferred contract acquisition costs 43,463 44,958 33,368 Gain from deconsolidation of Arch, formerly Meltano — ( 17,798 ) — Loss from equity method investment 3,824 3,189 — Impairment of equity method investment 8,858 — — Net amortization of premiums or discounts on short-term investments ( 20,349 ) ( 6,077 ) — Unrealized foreign exchange loss (gain), net 4,648 ( 3,727 ) 20,389 Other non-cash expense, net 1,330 1,156 197 Changes in assets and liabilities: Accounts receivable ( 36,341 ) ( 54,169 ) ( 38,223 ) Prepaid expenses and other current assets ( 23,854 ) ( 8,909 ) ( 8,219 ) Deferred contract acquisition costs ( 53,100 ) ( 48,555 ) ( 42,575 ) Other non-current assets ( 309 ) 3,012 ( 3,374 ) Accounts payable ( 3,443 ) 287 1,877 Accrued expenses and other current liabilities 258,293 4,619 13,953 Accrued compensation and benefits 15,173 ( 11,693 ) 19,755 Deferred revenue 79,347 73,003 79,074 Other non-current liabilities 5,249 ( 2,446 ) 307 Net cash provided by (used in) operating activities 35,040 ( 77,408 ) ( 49,814 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments ( 815,697 ) ( 821,622 ) ( 100,031 ) Proceeds from maturities of short-term investments 734,007 231,626 50,000 Purchases of property and equipment ( 1,598 ) ( 6,070 ) ( 3,541 ) Deconsolidation of Arch, formerly Meltano — ( 9,620 ) — Escrow payment related to business combination, after acquisition date ( 2,500 ) — — Payments for business combination, net of cash acquired and consideration withheld in an escrow — — ( 323 ) Other investing activities ( 450 ) — — Net cash used in investing activities ( 86,238 ) ( 605,686 ) ( 53,895 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from initial public offering, net of underwriting discounts — — 654,552 Proceeds from the issuance of common stock upon exercise of stock options, including early exercises, net of repurchases 32,302 24,515 25,354 Issuance of common stock under employee stock purchase plan 12,933 14,378 — Proceeds from warrants exercised — — 86 Repurchase of common stock in a tender offer — — ( 590 ) Contributions received from noncontrolling interests, net of issuance costs — 61,726 26,450 94 Table of Contents Partial settlement of acquisition related contingent cash consideration — ( 3,137 ) — Payments of deferred offering costs — — ( 4,667 ) Net cash provided by financing activities 45,235 97,482 701,185 Impact of foreign exchange on cash and cash equivalents ( 3,943 ) ( 3,658 ) 6,846 Net increase (decrease) in cash and cash equivalents ( 9,906 ) ( 589,270 ) 604,322 Cash, cash equivalents, and restricted cash at beginning of period 297,902 887,172 282,850 Cash, cash equivalents, and restricted cash at end of period $ 287,996 $ 297,902 $ 887,172 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 6,903 $ 838 $ 1,310 Cash donations $ — $ — $ 1,000 Supplemental disclosure of non-cash investing and financing activities: Vesting of early exercised stock options $ 1,234 $ 4,706 $ 7,212 Issuance of common stock upon conversion of preferred stock $ — $ — $ 424,904 Unpaid property and equipment in accrued expenses $ — $ — $ 273 Unpaid deferred offering costs $ — $ — $ 40 Reconciliation of cash, cash equivalents and restricted cash within the consolidated balance sheets to the amounts shown in the statements of cash flows above: Cash and cash equivalents $ 287,996 $ 295,402 $ 884,672 Restricted cash, included in prepaid expenses and other current assets — 2,500 — Restricted cash, included in other non-current assets — — 2,500 Total cash, cash equivalents and restricted cash $ 287,996 $ 297,902 $ 887,172 The accompanying notes are an integral part of these consolidated financial statements. 95 Table of Contents GitLab Inc. Notes to Consolidated Financial Statements 1. Organization and Description of Business GitLab Inc. (the “Company”) began as an open source project in 2011 and was incorporated in Delaware on September 12, 2014. The Company operates on an all-remote model. 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. The Company also provides related training and professional services. GitLab is offered on both self-managed and software-as-a-service ("SaaS") models. The principal markets for GitLab are currently located in the United States, Europe, and Asia Pacific. 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. 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Fiscal Year The Company's fiscal year ends on January 31. For example, references to fiscal 2024 and 2023 refer to the fiscal year ended January 31, 2024 and 2023, respectively. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. 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, 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, reserves for unrecognized income tax benefits, valuation of acquired 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. Principles of Consolidation The consolidated financial statements include 100% of the accounts of wholly owned and majority owned subsidiaries as well as a variable interest entity for which the Company is the primary beneficiary. The ownership interest of other investors is recorded as noncontrolling interest. All intercompany accounts and transactions have been eliminated in consolidation. Foreign Currency The reporting currency of the Company is the U.S. dollar. The Company determines the functional currency of each foreign subsidiary and the variable interest entity in accordance with ASC 830, Foreign Currency Matters, based on the currency of the primary economic environment in which each subsidiary and the variable interest entity operate. Items included in the financial statements of such subsidiaries and the variable interest entity are measured using that functional currency. 96 Table of Contents For subsidiaries where the U.S. dollar is the functional currency, foreign currency denominated monetary assets and liabilities are re-measured into U.S. dollars at current exchange rates and foreign currency denominated non-monetary assets and liabilities are re-measured into U.S. dollars at historical exchange rates. 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, 2024, 2023 and 2022, the Company recognized foreign exchange gains (losses), net of $( 3.2 ) million, $ 4.4 million and $( 29.1 ) million, respectively. For subsidiaries and the variable interest entity where the functional currency is other than the U.S. dollar, the Company uses the period-end exchange rates to translate assets and liabilities, the average monthly exchange rates to translate revenue and expenses, and historical exchange rates to translate stockholders’ equity (deficit) into U.S. dollars. The Company records translation gains and losses in accumulated other comprehensive income (loss) as a component of stockholders’ equity (deficit) in the consolidated balance sheets. For the years ended January 31, 2024, 2023 and 2022, the Company recognized foreign translation adjustments of $( 4.1 ) million, $( 5.9 ) million and $ 27.6 million, respectively. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents as of January 31, 2024 and 2023 , 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 as of January 31, 2023, consists of a $ 2.5 million acquisition related security deposit withheld in an escrow for any potential post-closing indemnification claims. The Company fully paid this acquisition-related holdback during the year ended January 31, 2024. Refer to “Note 7. Business Combination .” 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, 2024 and 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. The cost of securities sold is based on the specific-identification method. Unrealized gains and losses are reported as a separate component of accumulated other comprehensive income (loss). 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. 97 Table of Contents Available-for-sale securities are recorded at fair value each reporting period and are adjusted for the amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income of the consolidated statements of operations. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable, which represent trade receivables from the Company’s customers, are recorded at the invoiced amount and do not bear interest. 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 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, 2024 and 2023, the allowance for doubtful accounts was $ 0.7 million and $ 1.6 million, respectively. Accounts receivable deemed uncollectible are written off against the allowance when identified. Concentration of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments, and accounts receivable. At times, cash deposits may be in excess of insured limits. 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. As of January 31, 2024, two of these channel partners represented 12 % and 13 % of the accounts receivable balance, respectively, while as of January 31, 2023, one of these channel partners represented 12 % of the accounts receivable balance. There were no individual customers whose balance represented more than 10% of accounts receivable as of January 31, 2024 and 2023. There were no individual customers whose revenue represented more than 10% of total revenue during the years ended January 31, 2024, 2023 and 2022. Fair Value of Financial Instruments We define fair value as the price that would be received from selling an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which to transact and the market-based risk. We apply fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The carrying amounts reported in the consolidated financial statements approximate the fair value for cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable and accrued liabilities due to their short-term nature. The Company also recorded at fair value acquisition related contingent considerations further discussed in “Note 7. Business Combination.” 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. U.S. 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. 98 Table of Contents Level 2 – 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. Level 3 – 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. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial or nonfinancial asset or liability. Revenue Recognition The Company generates revenue primarily from offering self-managed (on-premise) and SaaS subscriptions. Revenue is also generated from professional services, including consulting and training. In accordance with ASC 606, revenue is recognized when a customer obtains control of the promised products and services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these products and services. To achieve the core principle of this standard, the Company applies the following five-step model as a framework: 1) Identify the contract with a customer. We consider the terms and conditions of our arrangements with customers to identify contracts under ASC 606. We consider that we have a contract with a customer when the contract is approved, we can identify each party's rights regarding the products and services to be transferred, we can identify the payment terms for the products and services, we have determined the customer has the ability and intent to pay, and the contract has commercial substance. We apply judgment in determining the customer's ability and intent to pay, which is based upon factors including the customer's historical payment experience or, for new customers, credit and financial information pertaining to the customers. At contract inception, we also evaluate whether two or more contracts should be combined and accounted for as a single contract. Further, contract modifications generally qualify as a separate contract. The typical term of a subscription contract for self-managed or SaaS offering is one to three years . Our contracts are non-cancelable over the contract term and we act as principal in all our customer contracts. Customers have the right to terminate their contracts generally only if we breach the contract and we fail to remedy the breach in accordance with the contractual terms. 2) Identify the performance obligations in the contract . Performance obligations in our contracts are identified based on the products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the product or service is separately identifiable from other promises in the contract. 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 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. Services-related performance obligations relate to the provision of consulting and training services. These services are distinct from subscriptions and do not result in significant customization of the software except in certain limited unique contracts. 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 99 Table of Contents 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. 3) Determine the transaction price . We determine transaction price based on the consideration to which we expect to be entitled in exchange for transferring products and services to the customer. If the consideration to which we expect to be entitled includes variable consideration, the amount of variable consideration included in the transaction price is estimated. In the event that some portion of the estimated variable consideration is uncertain, such estimates are constrained. Variable consideration is therefore included in the transaction price only to the extent it is probable that a significant future reversal of cumulative revenue under the contract will not occur when the uncertainty associated with the variable consideration is resolved. Our contracts are non-refundable and non-cancellable. We do not offer refunds, rebates, or credits to our customers in the normal course of business. The impact of variable considerations has not been material. For contracts with a one year term, we applied a practical expedient available under ASC 606 and made no evaluation for the existence of a significant financing component. In these contracts, at contract inception, the period between when we expect to transfer a promised product or service to the customer and when the customer pays for that product or service will be one year or less. For contracts with terms of more than a year, we have applied judgment in determining that advance payments in such contracts are not collected with the primary intention of availing finance and therefore, do not represent a significant financing component. Revenue is recognized net of any taxes collected from customers which are subsequently remitted to governmental entities (e.g., sales tax and other indirect taxes). We do not offer the right of refund in our contracts. 4) Allocate the transaction price to the performance obligations in the contract. 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 SSP for each performance obligation. We use judgment in determining the SSP for our products and services. We typically assess the SSP for our products and services on an annual basis or when facts and circumstances change. To determine SSP, we maximize the use of observable standalone sales and observable data, where available. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include other observable inputs or use the expected cost-plus margin approach to estimate the price we would charge if the products and services were sold separately. The expected cost-plus margin approach is currently used to determine SSP for each distinct performance obligation for self-managed subscriptions. 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 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. 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 100 Table of Contents in exchange for those products and services. All revenue is generated from contracts with customers. Subscription - self-managed and SaaS Subscription - self-managed 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 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 to 23 %, with the majority being less than 14 %, 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 . Since January 2021, Starter paid tier is no longer offered to new customers but remains available for a limited transitory period to our existing customers. SaaS 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 SaaS offering is one to three years . Since January 2021, Starter paid 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 to 23 %, with the majority being less than 14 %, of the entire 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 for fixed fee offerings. Uncertainty exists about customer acceptance and therefore, control is presumed to transfer upon confirmation from the customer, 101 Table of Contents as defined in each professional services contract. Accordingly, revenue is recognized upon satisfaction of all requirements per the applicable contract. Revenue from professional services provided on a time and material basis is recognized over the periods services are delivered. The Company presents financial information about disaggregation of revenue in “Note 3. Revenues” of the consolidated financial statements. Deferred Revenue and Contract Assets Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. The portion of deferred revenue that the Company will recognize during the twelve-month period from the balance sheet date is recorded within current liabilities and the remaining portion is recorded as long-term. The Company receives payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Customers are generally billed in advance, including some multi-year contracts, but the majority of customers in multi-year contracts specifically request to pay annually in advance. Payment terms on invoiced amounts are typically 30 to 60 days. In limited cases, the Company has offered deferred payment terms of a maximum of one year in contracts with a one year contractual term. 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, the excess is reclassified 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, 2024, 2023 and 2022, $ 217.0 million, $ 145.9 million and $ 87.1 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. Remaining Performance Obligations As of January 31, 2024 and 2023, 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 $ 673.8 million and $ 435.9 million, respectively. As of January 31, 2024, the Company expects to recognize approximately 64 % of the transaction price as product or services revenue over the next 12 months and 87 % over the next 24 months. Deferred Contract Acquisition Costs Sales commissions and bonuses that are direct and incremental costs of the acquisition of contracts with customers are capitalized. These costs are recorded as deferred contract acquisition costs on the consolidated balance sheets. The Company determines whether costs should be deferred when the costs are direct and incremental and would not have occurred absent the customer contract. 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 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. 102 Table of Contents 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. 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, 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 Costs related to research and development of the Company’s software offerings are expensed as incurred. These costs consist primarily of compensation paid to the Company's research and development personnel, including contractors. The Company’s internal customer software development process follows an iterative process that results in more frequent software releases than do traditional sequential or waterfall development methodologies and also results in internal validation of the software releases very shortly before they are made available to customers. Therefore, to date, costs to develop software that is marketed externally have not been capitalized as the current software development process is essentially completed concurrently with the establishment of technological feasibility through internal validation of the software releases. As such, all related software development costs are expensed as incurred and included in research and development expenses in the consolidated statements of operations. To date, software development for internal use has been immaterial and no such costs have been capitalized. Advertising Costs Advertising costs are expensed as incurred and are included within sales and marketing expenses in the consolidated statements of operations. Th ese include costs incurred on public relations, website design, advertising, field marketing, and market research services. The Company incurred advertising costs of $ 32.5 million, $ 27.3 million and $ 21.4 million during the years ended January 31, 2024, 2023 and 2022, respectively. Loss Contingencies 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. If applicable, the Company records receivables for probable insurance or other third-party recoveries. Due to uncertainties related to these matters, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability and may revise its estimates. These revisions in the estimates of the potential liabilities could have a material impact on the Company’s results of operations and financial position. Legal fees and other costs associated with such actions are expensed as incurred. Income Taxes The Company is subject to income taxes in the United States and several foreign jurisdictions. The Company records a provision for income taxes for the anticipated tax consequences of the reported 103 Table of Contents results of operations using the asset and liability method. 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. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized. Management applies significant judgment in assessing the positive and negative evidence available in the determination of the amount of deferred tax assets that were more likely than not to be realized in the future. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the tax law. The Company regularly reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, and tax planning strategies. The Company’s judgments regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute its business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, the tax provision would increase or decrease in the period in which the assessment is changed. Compliance with income tax regulations requires the Company to take certain tax positions. In assessing the exposure associated with various filing positions, the Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company uses a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of the available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than fifty percent likely of being realized upon ultimate settlement. Interest and penalties related to unrecognized tax benefits, if any, are included within the provision for income taxes in the consolidated statement of operations. Comprehensive Loss and Accumulated Other Comprehensive Income (Loss) Comprehensive loss includes net loss and changes in stockholders’ equity 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 Basic net loss per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net loss attributable to common stockholders by the weighted-average shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares used in the basic loss per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive instruments. We exclude equity instruments from the calculation of diluted loss per share if the effect of including such instruments is anti-dilutive. Since we are in a net 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 potentially dilutive securities outstanding would have been anti-dilutive. For this calculation, convertible preferred stock, warrants and stock options are considered potentially dilutive instruments. 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. 104 Table of Contents Stock-Based Compensation 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 generally recognized as expense on a straight-line basis over the requisite service period. Forfeitures are recorded as they occur. The Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options. In May 2021, the Company granted 3 million shares of restricted stock units (“RSUs”) tied to our Class B common stock to Mr. Sijbrandij, our founder and CEO. 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. The fair value of the RSUs was determined utilizing a Monte Carlo valuation model. 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. Equity” for further discussion. In September 2021, our board of directors and our stockholders approved the 2021 Employee Stock Purchase Plan (“ESPP”) to enable eligible team members to purchase shares of our Class A common stock with accumulated payroll deductions. 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. We have been determining the volatility input based on the historical volatility of our peer group until such time as we established a 2-year public trading history of our own stock price. For the new offering period starting December 2023, we transitioned to using an average blend of historical volatility of our peer group and volatility of our own stock price when determining the volatility input. 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 Our primary business activity is to sell subscriptions on both self-managed and SaaS models. Our chief operating decision maker, who is the Co-founder and Chief Executive Officer, reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources and evaluating financial performance. Accordingly, we operate our business as one operating 105 Table of Contents segment and one reporting unit. The Company presents financial information about geographical mix of revenue in “Note 3. Revenues” of the consolidated financial statements. Business Combination We include the results of operations of the businesses that we acquire beginning from the respective dates of acquisition. We allocate the fair value of the purchase price of our acquisitions to the tangible and intangible assets acquired, and liabilities assumed, based on their estimated fair values. The excess of the fair value of purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. 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 Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. 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 . 106 Table of Contents Leases 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. The Company does 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 We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset (including an intangible asset) may not be recoverable. An asset is considered impaired if its carrying amount exceeds the future undiscounted cash flow the asset is expected to generate. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If a long-lived asset (including an intangible asset) is considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value. We have made no material adjustments to our long-lived assets (including intangible assets) in any of the years presented. 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. 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. The Company determined there was an impairment during the year ended January 31, 2024. Refer to “Note 12. Joint Venture and Equity Method Investment” for more information. 107 Table of Contents Recently Adopted Accounting Standards There were no recently adopted accounting standards during the year ended January 31, 2024 that had a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Standards Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting ("Topic 280"): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires enhanced disclosures on an annual and interim basis for significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment. For public business entities the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company has not early adopted ASU 2023-07 and is currently evaluating the impact on the consolidated financial disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes ("Topic 740"): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires enhancements to current disclosures in order to enhance the transparency and decision usefulness of income tax disclosures. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024 and early adoption is permitted. The Company has not early adopted ASU 2023-09 and is currently evaluating the impact on the consolidated financial disclosures. 3. Revenues Disaggregation of Revenue The following table shows the components of revenues and their respective percentages of total revenue for the periods indicated (in thousands, except percentages): Fiscal Year Ended January 31, 2024 2023 2022 Subscription—self-managed and SaaS $ 506,306 87 % $ 369,349 87 % $ 226,163 90 % Subscription—self-managed 355,707 61 275,275 65 179,564 72 SaaS 150,599 26 94,074 22 46,599 18 License—self-managed and other $ 73,600 13 % $ 54,987 13 % $ 26,490 10 % License—self-managed 63,110 11 46,046 11 20,171 8 Professional services and other 10,490 2 8,941 2 6,319 2 Total revenue $ 579,906 100 % $ 424,336 100 % $ 252,653 100 % 108 Table of Contents Total Revenue by Geographic Location The following table summarizes the Company’s total revenue by geographic location based on the region of the Company’s contracting entity, which may be different than the region of the customer (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 United States $ 473,021 $ 352,975 $ 211,520 Europe 93,292 61,820 36,478 Asia Pacific 13,593 9,541 4,655 Total revenue $ 579,906 $ 424,336 $ 252,653 During the years ended January 31, 2024, 2023 and 2022, the United States accounted for 82 %, 83 % and 84 % of total revenue, respectively. No other individual country exceeded 10% of total revenue for any of the periods presented. The Company operates its business as a single operating segment. 4. 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, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and cash equivalents: Cash $ 80,953 $ — $ — $ 80,953 Money market funds 187,175 — — 187,175 U.S. Treasury securities 15,909 — ( 2 ) 15,907 Commercial paper 3,962 — ( 1 ) 3,961 Total cash and cash equivalents $ 287,999 $ — $ ( 3 ) $ 287,996 Short-term investments: Commercial paper 23,229 14 ( 1 ) 23,242 Corporate debt securities 231,219 740 ( 250 ) 231,709 U.S. Agency securities 56,324 29 ( 136 ) 56,217 U.S. Treasury securities 437,369 141 ( 389 ) 437,121 Total short-term investments $ 748,141 $ 924 $ ( 776 ) $ 748,289 109 Table of Contents 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 U.S. 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 U.S. Agency securities 74,158 2 ( 435 ) 73,725 U.S. Treasury securities 383,238 — ( 3,729 ) 379,509 Total short-term investments $ 646,104 $ 53 $ ( 4,908 ) $ 641,249 The Company uses the specific-identification method to determine an y realized gains or losses from the sale of the Company’s 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 years ended January 31, 2024 and 2023, the Company recorded $ 39.1 million and $ 14.5 million of interest income on cash equivalents and short-term investments, respectively, which includes $ 20.3 million and $ 6.1 million of net amortization of premiums or disco unts on short-term investments during the years ended January 31, 2024 and 2023, respectively . During the year ended January 31, 2022, the Company recorded $ 0.7 million of interest income on cash equivalents and short-term investments. The following table summarizes unrealized losses on the Company’s cash equivalents and short-term investments aggregated by category and the length of time such aggregated investments have been in a continuous unrealized loss position as of the periods presented (in thousands): Less Than 12 Months 12 Months or Greater Total Carrying Value Gross Unrealized Losses Carrying Value Gross Unrealized Losses Fair Value Gross Unrealized Losses January 31, 2024 U.S. Agency securities $ 35,979 $ ( 53 ) $ 11,386 $ ( 83 ) $ 47,365 $ ( 136 ) Commercial paper 15,462 ( 2 ) — — 15,462 ( 2 ) Corporate debt securities 85,998 ( 192 ) 15,485 ( 58 ) 101,483 ( 250 ) U.S. Treasury securities 139,567 ( 192 ) 41,193 ( 199 ) 180,760 ( 391 ) Total cash equivalents and short-term investments $ 277,006 $ ( 439 ) $ 68,064 $ ( 340 ) $ 345,070 $ ( 779 ) 110 Table of Contents Less Than 12 Months 12 Months or Greater Total Carrying Value Gross Unrealized Losses Carrying Value Gross Unrealized Losses Fair Value Gross Unrealized Losses January 31, 2023 U.S. Agency securities $ 73,724 $ ( 435 ) $ — $ — $ 73,724 $ ( 435 ) Commercial paper 45,015 ( 112 ) — — 45,015 ( 112 ) Corporate debt securities 75,203 ( 572 ) — — 75,203 ( 572 ) Municipal bonds 1,970 ( 19 ) — — 1,970 ( 19 ) Foreign government bonds 2,170 ( 41 ) — — 2,170 ( 41 ) U.S. Treasury securities 379,509 ( 3,729 ) — — 379,509 ( 3,729 ) Total cash equivalents and short-term investments $ 577,591 $ ( 4,908 ) $ — $ — $ 577,591 $ ( 4,908 ) The following table classifies the Company’s short-term investments by contractual maturities (in thousands): January 31, 2024 January 31, 2023 Amortized cost Fair Value Amortized cost Fair Value Due within 1 year $ 619,286 $ 618,765 $ 480,943 $ 477,520 Due between 1 year to 2 years 128,855 129,524 165,161 163,729 Total $ 748,141 $ 748,289 $ 646,104 $ 641,249 All available-for-sale securities have been classified as current, based on management’s ability to use the funds in current operations. 5. 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: Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: 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. Level 3: 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. 111 Table of Contents 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, 2024 (1) Cash equivalents: Money market funds $ 187,175 $ — $ — $ 187,175 U.S. Treasury securities — 15,907 — 15,907 Commercial paper — 3,961 — 3,961 Short-term investments: Commercial paper — 23,242 — 23,242 Corporate debt securities — 231,709 — 231,709 U.S. Agency securities — 56,217 — 56,217 U.S. Treasury securities — 437,121 — 437,121 Total $ 187,175 $ 768,157 $ — $ 955,332 (1) Excludes $ 81.0 million in cash on the consolidated balance sheet as of January 31, 2024. Level 1 Level 2 Level 3 Fair Value January 31, 2023 (1) Cash equivalents: Money market funds $ 60,073 $ — $ — $ 60,073 U.S. 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 U.S. Agency securities — 73,725 — 73,725 U.S. Treasury securities — 379,509 — 379,509 Total $ 60,073 $ 644,246 $ — $ 704,319 (1) Exclu des $ 232.3 million in cash on the consolidated balance sheet as of January 31, 2023. The Company h ad $ 3.6 million and $ 3.4 million of Level 3 contingent consideration as of January 31, 2024 and January 31, 2023, respec tively. Refer to “Note 6. Supplemental Financial Statement Information” for further details. 112 Table of Contents 6. Supplemental Financial Statement Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in thousands): January 31, 2024 January 31, 2023 Prepaid software subscriptions $ 12,835 $ 7,771 Prepaid expenses for the Company’s events 9,245 1,885 Prepaid taxes 1,431 592 Prepaid insurance 2,718 3,199 Prepaid advertising costs 1,621 367 Other prepaid expenses 1,776 1,915 Restricted cash (1) — 2,500 Interest receivable 4,159 2,310 Income tax receivable related to BAPA 6,460 — Vendor receivable 2,000 — Revenue contract asset 1,910 1,532 Security and other deposits 371 510 Other current assets 1,075 1,746 Total prepaid expenses and other current assets $ 45,601 $ 24,327 (1) Refer to “Note 7. Business Combination”. Property and Equipment, Net Property and equipment, net of the following (in thousands): January 31, 2024 January 31, 2023 Computer and office equipment $ 9,182 $ 8,581 Leasehold improvements 1,154 1,208 10,336 9,789 Less: Accumulated depreciation (1) ( 7,382 ) ( 3,992 ) Total property and equipment, net (1) $ 2,954 $ 5,797 (1) The amounts in the table above include cumulative foreign currency translation adjustments, reflecting movement in the currencies of the underlying property and equipment. During the year ended January 31, 2024 , the Company also wrote off $ 1.1 million of fully depreciated assets as they were no longer in use. Depreciation expense of property and equipm ent was $ 4.4 million , $ 3.2 million and $ 0.5 million for th e years ended January 31, 2024, 2023 and 2022, respectively. 113 Table of Contents Other Non-Current Assets Other non-current assets consisted of the following (in thousands): January 31, 2024 January 31, 2023 Security and other deposits $ 3,495 $ 3,172 Deferred software implementation costs 336 594 Other non-current assets 559 321 Total other non-current assets $ 4,390 $ 4,087 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): January 31, 2024 January 31, 2023 Income tax liability related to BAPA (1) $ 258,675 $ — Accrued expenses 11,499 10,949 Income taxes payable 2,212 859 Indirect taxes payable 3,928 4,498 Acquisition related contingent cash consideration 3,608 — Customer refunds payable 3,019 3,465 ESPP employee contributions 2,827 2,967 Operating lease liabilities, current 410 716 Acquisition related consideration withheld in escrow (2) — 2,500 Total accrued expenses and other current liabilities $ 286,178 $ 25,954 (1) Refer to “Note 13. Income Taxes” for a discussion on the unrecognized tax benefits related to the BAPA. (2) Refer to “Note 7. Business Combination”. Accrued Com pensation and Benefits Accrued compensation and benefits consisted of the following (in thousands): January 31, 2024 January 31, 2023 Accrued commissions $ 12,734 $ 8,512 Payroll taxes payable 9,306 3,013 Restructuring accrual and related charges (1) 188 — Other accrued team member related payables 13,581 9,251 Total accrued compensation and benefits $ 35,809 $ 20,776 (1) Refer to “Note 11. Restructuring and Other Related Charges”. 114 Table of Contents Other Non-Current Liabilities Other non-current liabilities consisted of the following (in thousands): January 31, 2024 January 31, 2023 Deferred tax liabilities, net $ 10,560 $ 849 Provision towards labor matters (1) 2,197 2,504 Long term taxes payable 771 647 Early exercised options liability 420 1,800 Acquisition related contingent cash consideration (2) — 3,443 Operating lease liabilities, non-current — 413 Other non-current liabilities 112 168 Total other non-current liabilities $ 14,060 $ 9,824 (1) Refer to “Note 15. Commitments and Contingencies ”. (2) Refer to “Note 7. Business Combination”. Other Inc ome (Expense), Net Other income (expense), net consisted of the following (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Gain from deconsolidation of Arch, formerly Meltano (1) $ — $ 17,798 $ — Impairment loss equity method investment in Arch, formerly Meltano (1) ( 8,858 ) — — Foreign exchange gains (losses), net ( 3,157 ) 4,364 ( 29,140 ) Other income (expense), net 189 ( 577 ) ( 1,710 ) Total other income (expense), net $ ( 11,826 ) $ 21,585 $ ( 30,850 ) (1) Refer to “Note 12. Joint Venture and Equity Method Investment”. 115 Table of Contents 7. Business Combination On December 3, 2021, th e Company completed the acquisition of Opstrace, Inc., a technology company based in San Francisco, California. The transaction was accounted for as a business combination. The acquisition date fair value of the consideration transferred was $ 13.5 million, which included contingent cash consideration. As of January 31, 2023, t he Company held $ 2.5 million in an escrow as partial security for post-closing indemnification claims made within 18 months of the closing da te. The Company fully paid this acquisition-related holdback during the year ended January 31, 2024. In September 2022, one of the operational milestones was achieved and the Company paid $ 4.2 million of contingent cash consideration. The remaining contingent cash consideration is determined based upon the satisfaction of certain defined operational milestones and remeasured at fair value at each reporting period through earnings. 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 and there has been no change for the year ended January 31, 2024. As the fair value is based on unobservable inputs, the liability is included in Level 3 of the fair value measurement hierarchy. As of January 31, 2024 and January 31, 2023, the Company had recorded $ 3.6 million and $ 3.4 million of remaining contingent cash consideration which is included in other current liabilities and other long term liabilities on the respective consolidated balance sheets, respectively. Interest accretion expense on contingent cash consideration was $ 0.2 million, $ 0.3 million and zero for the years ended January 31, 2024, 2023 and 2022, respectively. 8. Goodwill and Intangible Assets, Net Goodwill The carrying amount of goodwill was as follows (in thousands): Carrying Amount Balance as of January 31, 2024 and January 31, 2023 $ 8,145 There was no goodwill impairment for any periods presented. 116 Table of Contents Intangible Assets Intangible assets, net consisted of the following (in thousands): January 31, 2024 Gross Carrying Amount Accumulated Amortization Net Book Value Weighted average remaining amortization period (years) Developed technology from business combination $ 6,200 $ ( 4,467 ) $ 1,733 0.8 Developed technology from asset acquisitions (1) (2) 914 ( 914 ) — 0.0 Total $ 7,114 $ ( 5,381 ) $ 1,733 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 Developed technology from asset acquisitions (1) 1,359 ( 1,257 ) 102 0.3 Total $ 7,559 $ ( 3,658 ) $ 3,901 (1) The amounts in the tables above include cumulative foreign currency translation adjustments, reflecting movement in the currencies of the underlying intangibles. (2) During the year ended January 31, 2024 , t he Company wrote o ff $ 0.4 million of fully amortized intangible assets as the technology had become obsolete. Amortization expense w a s $ 2.2 million, $ 2.4 million and $ 0.7 million for t he years ended January 31, 2024, 2023 and 2022 , respectively. As of January 31, 2024, future a mortization expense related to the intangibles assets is expected to be $ 1.7 million for the year ended January 31, 2025. 9. 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. Total contributions to these plans were $ 5.1 million, $ 3.9 million and $ 2.8 million for t he years ended January 31, 2024, 2023 and 2022 , respectively. 10. Equity In connection with the Company’s 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 117 Table of Contents dividends when and if declared by the board of directors. No dividends have been declared to date. 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. Common Stock The Company had shares of common stock reserved for future issuance as follows (in thousands): January 31, 2024 January 31, 2023 Class A and Class B common stock Options issued and outstanding 8,503 12,686 Shares available for issuance under Equity Incentive Plans 24,868 21,483 RSUs and PSUs issued and outstanding 10,930 8,336 Shares reserved for issuance to charitable organizations 1,404 1,636 ESPP 5,398 4,303 Total 51,103 48,444 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, 2024 and January 31, 2023 , there were 22,278 and 194,304 shares, respectively, of unvested options that had been early exercised and were subject to repurchase for a total liability of $ 0.4 million an d $ 1.8 million, respectively. The liability as sociated with early exercised options is included in other non-current liabilities in the consolidated balance sheets. For accounting purposes, issuance of shares will be recognized only on vesting. However, shares issued for the early exercise of options are included in issued and outstanding shares as they are legally issued and outstanding. Convertible Preferred Stock 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, 2024 and January 31, 2023, there were no shares of convertible preferred stock issued and outstanding. Equity Incentive Plans In 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”), in which shares of common stock of the Company are reserved for issuance of stock options to team members, directors, or consultants. The options generally vest 25 % upon completion of one year and then ratably over 36 months. Options generally expire ten years from the date of grant. All these options qualify as equity settled awards and contain no performance conditions. 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 118 Table of Contents 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): January 31, 2024 January 31, 2023 Available at beginning of period 21,483 18,248 Awards authorized 7,557 7,673 RSUs and PSUs granted ( 6,258 ) ( 6,651 ) RSUs and PSUs canceled and forfeited 1,292 657 Options canceled and forfeited 777 1,496 Options repurchased 17 60 Available at end of period 24,868 21,483 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. 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 2021 Plan. Both Plans allow the grantees to early exercise stock options. 119 Table of Contents 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) Balances at January 31, 2021 16,043 $ 6.33 8.39 $ 166.6 Options granted 7,936 18.68 8.50 Options exercised ( 4,789 ) 5.40 5.07 Options canceled ( 81 ) 6.20 — Options forfeited ( 1,963 ) 10.47 — Balances at January 31, 2022 17,146 $ 11.83 8.24 $ 894.8 Options granted — — — Options exercised ( 2,964 ) 8.49 — Options canceled ( 33 ) 9.46 — Options forfeited ( 1,463 ) 14.52 — Balances at January 31, 2023 12,686 $ 12.30 7.00 $ 470.8 Options granted — — — Options exercised ( 3,406 ) 9.53 — Options canceled ( 126 ) 11.23 — Options forfeited ( 651 ) 17.24 — Balances at January 31, 2024 8,503 $ 13.03 5.85 $ 499.2 Options vested at January 31, 2024 6,323 $ 11.42 5.52 $ 377.4 Options vested and expected to vest at January 31, 2024 8,503 $ 13.03 5.85 $ 499.2 No options were granted during the years ended January 31, 2024 and 2023 and the aggregate grant-date fair value of options that vested during the years ended January 31, 2024, 2023 and 2022 was $ 17.9 million, $ 31.0 million and $ 10.8 million, respectively. The weighted-average grant-date fair value per share of options granted was $ 10.81 for the year ended January 31, 2022. The aggregate intrinsic value of options exercised during the years ended January 31, 2024, 2023 and 2022 was $ 128.8 million, $ 123.4 million and $ 280.5 million, 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. During the years ended January 31, 2024, 2023 and 2022, the Company recorded $ 17.6 million, $ 23.2 million and $ 22.6 million stock-based compensation expenses related to options, respectively. As of January 31, 2024, approximately $ 21.9 million of total unrecognized compensation cost was related to stock options granted, that is expected to be recognized over a weighted-average period of 1.5 years. The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures. The following table summarizes the Company’s RSU activity (in thousands): Number of Shares (1) Weighted- Average grant date fair value Balances at January 31, 2021 — $ — 120 Table of Contents Granted 272 82.11 Vested — — Canceled/forfeited — — Balances at January 31, 2022 $ 0.3 $ 82.11 Granted 6,286 52.52 Vested ( 930 ) 55.01 Canceled/forfeited ( 610 ) 54.56 Balances at January 31, 2023 5,046 $ 53.33 Granted 6,258 43.42 Vested ( 2,372 ) 48.47 Canceled/forfeited ( 1,203 ) 50.47 Balances at January 31, 2024 7,729 $ 47.20 (1) The table above does not include 3 million RSUs granted to the Company’s founder and the Chief Executive Officer (“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. During the years ended January 31, 2024, 2023 and 2022, the Company recorded $ 117.6 million, $ 61.6 million and $ 0.7 million stock-based compensation expenses related to RSUs, respectively. As of January 31, 2024, approximately $ 347.8 million of total unrecognized compensation cost was related to RSUs granted to team members other than the CEO, that is expected to be recognized over a weighted-average period of 3.0 years. 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 c ondition is set to be achieved in fiscal 2025 and the service condition in the calendar year 2025. The Company recorded $ 1.3 million and $ 1.6 million of stock-based compensation expense related to PSUs during the years ended January 31, 2024 and 2023, respectively. As of January 31, 2024, unrecognized stock-based compensation expense related to these PSUs was $ 2.6 million to be recognized over a period of 1.9 years. CEO Performance Award In May 2021, the Company granted 3 million RSUs tied to its Class B common stock to Sytse Sijbrandij, the Company’s co-founder and CEO, with an estimated aggregate grant date fair value of $ 8.8 million. During the years ended January 31, 2024, 2023 and 2022, the Company recorded $ 1.7 million, $ 1.7 million and $ 1.2 million of stock-based compensation expense related to the CEO RSUs, respectively. As measured from the grant date, the derived service period of the respective tranches ranges from 2 to 7 years. As of January 31, 2024, unrecognized stock-based compensation expense related to these RSUs was $ 4.3 million which will be recognized over 4.8 years. 2021 Employee Stock Purchase Plan (“ESPP”) In September 2021, the Company’s board of directors and its stockholders approved the ESPP and participation of eligible team members. 121 Table of Contents During the quarter ended July 31, 2023, the Company’s stock price on the purchase date, May 31, 2023, was lower than the Company’s stock price on the previously applicable offering date. As a result, the offering in effect was reset with the lower stock price becoming the new offering price and rolled over to a new 24-month offering period. The reset was treated as a modification resulting in incremental expense totaling $ 9.4 million, whi ch is being recognized over the remaining requisite service period as of the date of reset. During the quarter ended July 31, 2022, the Company’s stock price on the purchase date, May 31, 2022, was lower than the Company’s stock price on the previously applicable offering date. As a result, the offering in effect was reset with the lower stock price becoming the new offering price and rolled over to a new 24-month offering period. The reset was treated as a modification resulting in incremental expense totaling $ 9.9 million , which is being recognized over the remaining requisite service period as of the date of reset. 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, 2024 2023 2022 Risk-free interest rate 4.22 % - 5.30 % 1.62 % - 4.55 % 0.07 % - 0.17 % Volatility 40.95 % - 65.56 % 44.95 % - 55.19 % 38.47 % - 41.75 % Expected term (in years) 0.50 - 2.00 0.50 - 2.00 0.57 - 1.07 Dividend yield — % — % — % The Company recorded $ 19.0 million, $ 25.7 million and $ 5.1 million of stock-based compensation expense related to the ESPP during the years ended January 31, 2024, 2023 and 2022, respectively. As of January 31, 2024, approximately $ 13.5 million of total unrecognized compensation cost was related to the ESPP that is expected to be recognized over 1.8 years. Stock-Based Compensat ion Expense The Company recognized stock-based compensation expense as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Cost of revenue $ 6,400 $ 5,078 $ 1,300 Sales and marketing 68,766 48,001 10,550 Research and development 50,804 36,325 8,305 General and administrative 37,079 33,163 9,854 Total stock-based compensation expense (1) $ 163,049 $ 122,567 $ 30,009 (1) The table above includes stock-based compensation of JiHu. Refer to “Note 12. Joint Venture and Equity Method Investment” for further discussion. The corporate income tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was zero , $ 7.7 million and $ 7.0 million for the years ended January 31, 2024 , 2023 and 2022, respectively. Charitable Donation of Common Stock In September 2021, the Company’s board of directors approved the reservation of up to 1,635,545 shares of Class A common stock for issuance to charitable organizations. In March 2023, the Company’s 122 Table of Contents board of directors approved the donation of $ 10.7 million aggregate principal amount of shares of Class A common stock to the GitLab Foundation (the “Foundation”), a California nonprofit public benefit corporation. The Foundation is also a related party as certain of the Company’s officers serve as directors of the Foundation. This donation shall occur in equal quarterly distributions throughout fiscal 2024. During the year ended January 31, 2024, the Company donated 231,408 shares of Class A common stock at fair value to the Foundation. The fair value of the common stock was determined based on the quoted market price on the grant date. The donation expense of $ 10.7 million was recorded in general and administrative expense in the consolidated statements of operations for the year ended January 31, 2024. 11. Restructuring and Other Related Charges In February 2023, the Company reduced its total global headcount by approximately 7 % . As a result, the Company recognized total restructuring charges of approximately $ 9.3 million during the year ended January 31, 2024, which consisted primarily of one-time severance and other termination benefit costs of $ 8.0 million, as well as accelerated stock-based compensation of $ 1.3 million. The Company recognized one-time severance and other termination benefit costs as follows (in thousands): Fiscal Year Ended January 31, 2024 Cost of revenue $ 463 Research and development 2,119 Sales and marketing 3,811 General and administrative 1,634 Total (1) $ 8,027 (1) Excludes stock-based compensation of $ 1.3 million. The changes in liabilities resulting from the restructuring charges and related accruals were as follows (in thousands) : Balance as of January 31, 2023 $ — Charges (1) 8,027 Cash payments ( 7,839 ) Balance as of January 31, 2024 (2) $ 188 (1) Excludes stock-based compensation of $ 1.3 million. (2) Balance is included in accrued compensation and benefits on the consolidated balance sheet as of January 31, 2024. 123 Table of Contents 12. 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. The Company accounted for JiHu as a variable interest entity and consolidated the entity in accordance with ASC Topic 810, Consolidation . During fiscal year 2023, JiHu closed its Series A-1 through A-3 rounds of common stock financings where investors contributed a total of $ 54.6 million, net of issuance costs. 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. Subsequent to the closing of the financing rounds d uring fiscal year 2023 , the Company retained control over JiHu with its equity stake reduced from 72 % to 55 %. As of January 31, 2024, the Company still retains control over JiHu with its equity stake at approximately 54 %. In April 2022, the board of directors of JiHu approved an employee stock option plan (“JiHu ESOP”) for its employees. As a result of forfeitures triggered by the departure of certain executives during the year ended January 31, 2024, the Company reversed stock-based compensation previously recorded for such executives. The Company recorded a $ 1.5 million gain and $ 7.8 million loss for the years ended January 31, 2024 and 2023, respectively. As of January 31, 2024, approximately $ 3.6 million of total unrecognized compensation cost was related to the JiHu ESOP that is expected to be recognized over 3.9 y ears. 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. Operating Leases The Company reco gnized $ 0.6 million, $ 0.6 million and $ 0.2 million of operating lease expense during the years ended January 31, 2024, 2023 and 2022, respectively. JiHu has non-cancelable operating leases maturing during the year ended January 31, 2025 with total lease payments of $ 0.4 million and total present value of lease liabilities of $ 0.4 million. Lease expense for the one short-term lease was immaterial during the years ended January 31, 2024, 2023 and 2022. The table below presents supplemental information related to operating leases for the years ended January 31, 2024 (in thousands, except weighted-average information): Weighted-average remaining lease term (in years) 0.56 Weighted-average discount rate 3.7 % Cash paid for amounts included in the measurement of lease liabilities $ 694 124 Table of Contents Selected Financial Information Selected financial information of JiHu, post intercompany eliminations, is as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Revenue $ 6,451 $ 4,743 $ 1,237 Cost of revenue 2,414 1,731 945 Gross profit 4,037 3,012 292 Operating expenses: Sales and marketing 7,369 7,670 3,200 Research and development 5,338 6,818 2,299 General and administrative 1,864 10,515 3,589 Total operating expenses 14,571 25,003 9,088 Loss from operations ( 10,534 ) ( 21,991 ) ( 8,796 ) Interest income 1,078 659 — Other income, net 858 1,633 67 Net loss before income taxes ( 8,598 ) ( 19,699 ) ( 8,729 ) Benefit from income taxes ( 16 ) — — Net loss $ ( 8,614 ) $ ( 19,699 ) $ ( 8,729 ) Net loss attributable to noncontrolling interest $ ( 3,859 ) $ ( 8,385 ) $ ( 2,422 ) January 31, 2024 January 31, 2023 Cash and cash equivalents $ 43,896 $ 56,744 Property and equipment, net 489 1,135 Operating lease right-of-use assets 405 998 Other assets 2,835 3,950 Total assets $ 47,625 $ 62,827 Total liabilities $ 6,080 $ 8,871 Equity Method Investment In April 2021, the Company reorganized Meltano Inc. (“Meltano”), now operating as Arch Data, Inc. (“Arch”), 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, Arch closed its Series Seed-2 round of preferred stock financing and raised $ 7.2 million. Pursuant to this transaction, the board composition of Arch changed and the Company no longer has the power to appoint the majority of the board of directors of Arch. Consequently, despite having majority voting rights at the stockholder level, the Company no longer has control over Arch. 125 Table of Contents 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 Arch 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 in April 2022 . The fair value of retained interest was determined using the 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 Arch and the Company’s share in the net assets of Arch was attributed to equity method goodwill. Effective April 4, 2022, the Company accounts for this investment under the equity method. The Company reviews for impairment whenever factors indicate that the carrying value of the equity method investment may not be recoverable. In Accordance with ASC 820, Fair Value Measurement , the Company calculated that the estimated undiscounted cash flows related to its equity method investment were less than the carrying amount of the equity method investment. As a result, the Company recorded an impairment charge of $ 8.9 million in other income (expense), net in the consolidated statement of operations during the year ended January 31, 2024 which reduced the investment value to zero a s of January 31, 2024 . During the years ended January 31, 2024 and 2023, the Company recorded a loss from equity method investment of $ 3.8 million and $ 2.5 million, net of tax on the consolidated statements of operations, respectively. 13. Income Taxes The components of total loss from continuing operations before income taxes are as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 US $ 14,328 $ ( 4,877 ) $ 19,486 Foreign ( 174,480 ) ( 170,453 ) ( 178,557 ) Loss before income taxes $ ( 160,152 ) $ ( 175,330 ) $ ( 159,071 ) The provision for (benefit from) income taxes consisted of the following (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Current: Federal and State $ ( 1,768 ) $ 1,432 $ ( 863 ) Foreign 256,296 822 671 Total current $ 254,528 $ 2,254 $ ( 192 ) Deferred: Federal and State $ ( 810 ) $ 614 $ ( 1,443 ) Foreign 10,339 30 124 Total deferred $ 9,529 $ 644 $ ( 1,319 ) Provision for (benefit from) income taxes $ 264,057 $ 2,898 $ ( 1,511 ) 126 Table of Contents A reconciliation of the statutory U.S. federal income tax rate to the Company's effective tax rate is as follows: Fiscal Year Ended January 31, 2024 2023 2022 Tax at federal statutory rate 21.0 % 21.0 % 21.0 % State, net of federal benefit ( 0.1 ) ( 0.2 ) 0.2 Stock-based compensation 2.4 ( 0.4 ) 5.0 Non-deductible Executive Compensation ( 4.8 ) ( 1.6 ) ( 0.5 ) Research tax credit 6.3 2.7 1.0 Foreign rate differential ( 1.8 ) 5.5 6.1 Change in valuation allowance ( 83.5 ) ( 29.0 ) ( 30.3 ) Foreign derived intangible income deduction — 0.6 0.3 Unrecognized tax benefits ( 104.9 ) ( 0.5 ) ( 1.3 ) Other 0.5 0.2 ( 0.6 ) Total ( 164.9 ) % ( 1.7 ) % 0.9 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands): January 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 85,348 $ 144,016 Research tax credits 14,031 2,359 Deferred revenue 6,812 5,876 Accruals and other assets 6,237 3,590 Capitalized R&D 70,921 — Intangibles 110,160 8,278 Interest expense limitation 35,085 — Stock-based compensation 6,679 5,040 Gross deferred tax assets 335,273 169,159 Valuation allowance ( 328,385 ) ( 159,470 ) Net deferred tax assets 6,888 9,689 Deferred tax liabilities: Deferred contract acquisition costs ( 7,019 ) ( 6,095 ) Acquired intangibles — ( 863 ) Equity method investment — ( 2,892 ) Fixed assets ( 191 ) ( 499 ) Unrealized foreign exchange adjustments ( 10,024 ) — Other ( 23 ) ( 189 ) Net deferred tax liabilities $ ( 10,369 ) $ ( 849 ) 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 127 Table of Contents determining the Company’s ability to recognize its deferred tax assets. As in prior years, the Company maintained that it was not more likely than not that the Company could recognize deferred tax assets in certain jurisdictions. The evidence evaluated by the Company included operating results during the most recent three-year period and future projections. More weight was given to historical results than to 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. This valuation allowance will be evaluated periodically and could be reversed partially or totally if business results have sufficiently improved to support realization of deferred tax assets. The increase of $ 168.9 million in the valuation allowance for the year ended January 31, 2024 is primarily due to the addition of certain deferred tax assets from the estimated result of the settlement with the Internal Revenue Service and Dutch tax authorities. As of January 31, 2024, the Company recorded $ 10.4 million of net deferred tax liabilities. The Company has not recorded a provision for deferred U.S. tax expense that could result from the remittance of foreign undistributed earnings since the Company intends to reinvest the earnings of the foreign subsidiaries indefinitely. The Company’s share of the undistributed earnings of foreign corporations not included in its consolidated federal income tax returns that could be subject to additional U.S. income tax if remitted is immaterial. As of January 31, 2024, the amount of unrecognized U.S federal deferred income tax liability for undistributed earnings is immaterial. As of January 31, 2024, the Company had federal net operating loss carryforwards of approximately $ 285.6 million, state net operating loss carryforwards of approximately $ 336.7 million and foreign net operating loss carryforwards of approximately $ 31.7 million. The federal net operating loss carryforwards do not expire as they were generated after the enactment of the Tax Cuts and Jobs Act, where net operating losses generated after December 31, 2017 do not expire. The U.S. state net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2025. 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 $ 17.9 million for federal purposes. The U.S. Federal Research & Experimentation (R&E) credit, if not utilized, will begin to expire in 2038. The Company also has research tax credit carryforwards of approximately $ 3.9 million for U.S. 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 3 year period. Uncertain Tax Positions The Company has been in BAPA negotiations between the IRS and the DTA relating to the Company’s transfer pricing arrangements between the United States and the Netherlands. In the year ended January 31, 2024, the Company for the first time discussed with the IRS and DTA a framework to finalize its transfer pricing arrangements for the proposed BAPA period consisting of tax years ending December 31, 2018 through January 31, 2027. The proposed agreements between the Company, the IRS and the DTA are not yet final; in anticipation of the agreements, $ 254.9 million of net tax expense was recorded in the year ended January 31, 2024. This amount represents the unrecognized tax benefit relating to the BAPA. The unrecognized tax benefit represents the Company’s best estimate of the tax expense associated with the proposed agreements and their related effects. As of January 31, 2024, the Company’s U.S. federal 2018 through 2022 tax years were open and subject to potential examination in one or more jurisdictions. 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 the tax years ended December 31, 2015 and 2016. The Company expects negotiations to continue to the middle of fiscal 2025. The Company believes that it has adequately reserved for the outcome of this audit. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for 128 Table of Contents income taxes. 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. As of January 31, 2024, unrecognized tax benefits approximated $ 396.8 million, of which $ 207.8 million would affect the effective tax rate if recognized. We have classified approximately $ 207.3 million of the unrecognized tax benefit as a current tax liability due to the anticipated timing of the settlement with the IRS and DTA and their associated payments, which are expected to be made within the next 12 months. As of January 31, 2023, unrecognized tax benefits approximated $ 7.5 million, of which $ 0.5 million would affect the effective tax rate if recognized. The reconciliation of the Company's unrecognized tax benefits is as follows (in thousands): January 31, 2024 2023 Beginning balance $ 7,460 $ 5,557 Gross increases due to tax positions taken in prior periods 324,364 685 Gross increases due to tax position taken in current period 65,001 1,369 Gross decreases due to lapses in applicable statutes of limitations ( 1 ) ( 151 ) Ending balance $ 396,824 $ 7,460 The Company believes that it is reasonably possible that $ 389.0 million of the unrecognized tax benefit will be realized in the coming year due to the settlement of the BAPA. 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, 2024, 2023 and 2022, the Company recognized interest and penalties of $ 52.1 million, $ 0.2 million and $ 0.1 million, respe ctively. 14. Net Loss per Share The following table sets forth basic and diluted loss per share for each of the periods presented (in thousands, except per share data): Fiscal Year Ended January 31, 2024 2023 2022 Numerator: Net loss attributable to GitLab $ ( 424,174 ) $ ( 172,311 ) $ ( 155,138 ) Denominator: Weighted-average shares used to compute net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted 154,283 148,407 79,755 Net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted $ ( 2.75 ) $ ( 1.16 ) $ ( 1.95 ) 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 129 Table of Contents 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): As of January 31, 2024 January 31, 2023 January 31, 2022 Shares subject to outstanding common stock options 8,503 12,686 17,146 Unvested restricted stock in connection with business combination 3 8 16 Unvested early exercised stock options 22 194 714 Unvested RSUs and PSUs 10,930 8,336 3,264 Shares subject to the ESPP 63 81 256 Total 19,521 21,305 21,396 15. Commitments and Contingencies Contractual Obligations and Commitments The Company’s purchase oblig ations represent third-party non-cancelable hosting infrastructure agreements, subscription arrangements and other commitments used in the ordinary course of business to meet operational requirements. Future minimum payments under the Company’s non-cancelable purchase commitments as of January 31, 2024 were as follows (in thousands): Total Less than 1 Year 1-3 Years 4-5 Years Thereafter Purchase commitments (1) $ 152,849 $ 76,032 $ 76,300 $ 277 $ 240 (1) The table above includes $ 85 million of remaining non-cancelable contractual commitments as of January 31, 2024 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. 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, 2024 and January 31, 2023 , the estimated liability relating to these matters w as $ 2.2 million and $ 2.5 million recorded in other non-current liabilities on the consolidated balance sheets, respectively. Warranties and Indemnifications The Company enters into service level agreements with customers which warrant defined levels of uptime and support response times and permit those customers to receive credits for prepaid amounts in the event that those performance and response levels are not met. To date, the Company has not experienced any significant failures to meet defined levels of performance and response. 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. 130 Table of Contents 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. 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. The Company maintains director and officer insurance coverage that may enable the Company to recover a portion of any future amounts paid. Legal Proceedings 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 the Company because of defense and settlement costs, diversion of management resources and other factors. 16. Subsequent Event On March 20, 2024, the Company acquired all of the outstanding equity, vested employee stock options and other rights to acquire share capital of Oxeye Security Limited (“Oxeye”) in exchange for approximately $ 26.0 million in cash, subject to a one-time payment to the Israel Innovation Authority and certain customary purchase price adjustments, inclusive of amounts escrowed as partial security for Oxeye indemnification obligations and certain contingent consideration withheld at closing from certain Oxeye stockholders who became Company team members following the transaction. As part of the transaction, the Company will also offer RSUs as a substitution for unvested employee stock options held by the continuing employees of Oxeye. Oxeye has developed application security testing solutions and the Company believes this acquisition will allow the Company to strengthen its product offerings. Oxeye has negligible revenues as of the date of acquisition. The Company is currently in the process of finalizing the accounting for this transaction and expects to complete the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the first quarter of fiscal 2025. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. 131 Table of Contents