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Equity | 3 Months Ended
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Apr. 30, 2023
Equity [Abstract] |
Equity | 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 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):
|  |  | April 30, 2023 |  | January 31, 2023
Class A and Class B common stock |  |  |  |  |
Options issued and outstanding |  |  | 11,149 |  |  | 12,686 |
Shares available for issuance under Equity Incentive Plans |  |  | 25,914 |  |  | 21,483 |
RSUs and PSUs issued and outstanding |  |  | 11,531 |  |  | 8,336 |
Shares reserved for issuance to charitable organizations |  |  | 1,555 |  |  | 1,636 |
ESPP |  |  | 5,814 |  |  | 4,303 |
Total |  |  | 55,963 |  |  | 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 April 30, 2023 and January 31, 2023, there were 100,150 and 194,304 shares, respectively, of unvested options that had been early exercised and were subject to repurchase for a total liability of $1.2 million and $1.8 million, respectively. The liability as sociated with early exercised options is included in other long-term liabilities in the condensed 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. 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 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. As such, effective as of February 1, 2023, 7,557,298 shares were added to the 2021 Plan. The awards available for grant under the above Plans for the pe riods presented were as follows (in thousands):
|  |  | April 30, 2023 |  | January 31, 2023
Available at beginning of period |  |  | 21,483 |  |  | 18,248 |
Awards authorized |  |  | 7,557 |  |  | 7,673 |
RSUs and PSUs granted |  |  | (3,944) |  |  | (6,651) |
RSUs and PSUs canceled and forfeited |  |  | 390 |  |  | 657 |
Options canceled and forfeited |  |  | 415 |  |  | 1,496 |
Options repurchased |  |  | 13 |  |  | 60 |
Available at end of period |  |  | 25,914 |  |  | 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. 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, 2023 | 12,686 |  |  | $ | 12.30 |  |  | 7.00 |  | $ | 470.8 |
Options granted | — |  |  | — |  |  |  |  |
Options exercised | (1,122) |  |  | 6.87 |  |  |  |  |
Options canceled | — |  |  | — |  |  |  |  |
Options forfeited | (415) |  |  | 17.01 |  |  |  |  |
Balances at April 30, 2023 | 11,149 |  |  | $ | 12.67 |  |  | 7.02 |  | $ | 197.3 |
Options vested at April 30, 2023 | 6,808 |  |  | $ | 10.36 |  |  | 6.56 |  | $ | 136.1 |
Options vested and expected to vest at April 30, 2023 | 11,149 |  |  | $ | 12.67 |  |  | 7.02 |  | $ | 197.3 |
No options were granted during each of the three months ended April 30, 2023 and 2022. The aggregate intrinsic value of options exercised during the three months ended April 30, 2023 and 2022 was $32.6 million and $30.8 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. As of April 30, 2023 and January 31, 2023, approximately $37.4 million and $46.2 million, respectively, of total unrecognized compensation cost was related to stock options granted, that is expected to be recognized over a weighted-average period of 2.0 and 2.1 years, respectively. The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures. 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, 2023 | 5,018 |  |  | $ | 53.33 |
Granted | 3,944 |  |  | 37.44 |
Vested | (359) |  |  | 54.88 |
Canceled/forfeited | (390) |  |  | 53.62 |
Balances at April 30, 2023 | 8,213 |  |  | $ | 45.62 |
(1) The table above does not include 3 million RSUs issued 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. As of April 30, 2023 and January 31, 2023, approximately $357.2 million and $254.8 million, respectively, 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 3.4 years and 3.2 years, respectively. The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures. In June 2022, the Company granted 0.4 million PSUs to senior members of its management team subject to revenue performance condition and service conditions. The number of awards granted represents 100% of the target goal; under the terms of the awards, the recipient may earn between 0% and 200% of the original grant. The performance condition is set to be achieved in fiscal 2025 and the service condition in the calendar year 2025. The Company recorded $0.4 million of stock-based compensation expense related to PSUs during the three months ended April 30, 2023. As of April 30, 2023, unrecognized stock-based compensation expense related to these PSUs was $6.1 million to be recognized over a period of 2.6 years. CEO Performance Award In May 2021, the Company granted 3 million RSUs tied to its Class B common stock to Mr. Sijbrandij, the Company’s co-founder and CEO, with an estimated aggregate grant date fair value of $8.8 million. During each of the three months ended April 30, 2023 and 2022, the Company recorded $0.4 million of stock-based compensation expense related to the CEO RSUs. As measured from the grant date, the derived service period of the respective tranches ranges from 2 to 7 years. As of April 30, 2023, unrecognized stock-based compensation expense related to these RSUs was $5.5 million which will be recognized over 5.6 years. 2021 Employee Stock Purchase Plan (“ESPP”) In September 2021, the Company’s board of directors and its stockholders approved the ESPP to enable eligible team members. Effective as of February 1, 2023, 1,511,459 shares of the Company’s Class A common stock were added to the 2021 ESPP. 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 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:
| Three Months Ended April 30,
| 2023 |  | 2022
Risk-free interest rate | 1.62% - 4.55% |  | 0.07% - 0.47%
Volatility | 44.95% - 55.19% |  | 38.47% -46.61%
Expected term (in years) | 0.50 - 2.00 |  | 0.57 -2.07
Dividend yield | —% |  | —%
The Company record ed $4.5 million and $4.4 million of stock-based compensation expense related to the ESPP during the three months ended April 30, 2023 and 2022, respectively. As of April 30, 2023, approximately $14.2 million of total unrecognized compensation cost was related to the ESPP that is expected to be recognized over 1.6 years. Stock-Based Compensation Expense The Company recognized stock-based compensation expense as follows (in thousands):
| Three Months Ended April 30, |  |
| 2023 |  | 2022 |  |  |  |  |  |
Cost of revenue | $ | 1,414 |  |  | $ | 790 |  |  |  |  |  |  |
Research and development | 11,702 |  |  | 5,036 |  |  |  |  |  |  |
Sales and marketing | 13,764 |  |  | 7,051 |  |  |  |  |  |  |
General and administrative | 5,450 |  |  | 4,594 |  |  |  |  |  |  |
Total stock-based compensation expense (1) | $ | 32,330 |  |  | $ | 17,471 |  |  |  |  |  |  |
(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 condensed consolidated statements of operations for stock-based compensation expense w as $2.8 million and $0.9 million for the three months ended April 30, 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 board of directors approved the donation of $10.7 million aggregate principal amount of shares of Class A common stock to 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 three months ended April 30, 2023, the Company donated 80,742 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 $2.7 million was recorded in general and administrative expense in the condensed consolidated statements of operations for the three months ended April 30, 2023.

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