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Joint Venture and Equity Method Investment | 3 Months Ended
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Apr. 30, 2023
Noncontrolling Interest [Abstract] |
Joint Venture and Equity Method Investment | 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 April 30, 2023, the Company still retains control over JiHu with its equity stake at approximately 55%. 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 a key executive during the three months ended April 30, 2023, the Company reversed stock-based compensation previously recorded which resulted in a $2.5 million gain. For the three months ended April 30, 2022, the Company recorded $0.2 million of stock-based compensation expense. As of April 30, 2023, approximately $6.1 million of total unrecognized compensation cost was related to the JiHu ESOP that is expected to be recognized over 3.0 years. 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 recognized $0.2 million and $0.1 million of operating lease expense during the three months ended April 30, 2023 and 2022, respectively. JiHu has non-cancelable operating leases maturing over the next three years with total lease payments of $1.5 million and total present value of lease liabilities of $1.4 million. Lease expense for the one short-term lease was immaterial during each of the three months ended April 30, 2023 and 2022. The table below presents supplemental information related to operating leases for the three months ended April 30, 2023 (in thousands, except weighted-average information):
Weighted-average remaining lease term (in years) | 1.62 |  |  |  |
Weighted-average discount rate | 3.7 | % |  |  |  |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 485 |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities | $ | 160 |  |  |  |  |
Selected Financial Information Selected financial information of JiHu, post intercompany eliminations, is as follows (in thousands):
|  |  | Three Months Ended April 30,
|  |  |  |  | 2023 |  | 2022
Revenue |  |  |  |  | $ | 1,464 |  |  | $ | 1,093 |
Cost of revenue |  |  |  |  | 491 |  |  | 300 |
Gross profit |  |  |  |  | 973 |  |  | 793 |
Operating expenses: |  |  |  |  |  |  |
Sales and marketing |  |  |  |  | 2,084 |  |  | 1,387 |
Research and development |  |  |  |  | 1,956 |  |  | 928 |
General and administrative |  |  |  |  | (1,444) |  |  | 754 |
Total operating expenses |  |  |  |  | 2,596 |  |  | 3,069 |
Loss from operations |  |  |  |  | (1,623) |  |  | (2,276) |
Interest income |  |  |  |  | 315 |  |  | 67 |
Other income, net |  |  |  |  | 269 |  |  | 674 |
Net loss before income taxes |  |  |  |  | (1,039) |  |  | (1,535) |
Net loss |  |  |  |  | $ | (1,039) |  |  | $ | (1,535) |
Net loss attributable to noncontrolling interest |  |  |  |  | $ | (430) |  |  | $ | (514) |
| April 30, 2023 |  | January 31, 2023
Cash and cash equivalents | $ | 51,093 |  |  | $ | 56,744 |
Property and equipment, net | 1,039 |  |  | 1,135 |
Operating lease right-of-use assets | 1,300 |  |  | 998 |
Other assets | 3,575 |  |  | 3,950 |
Total assets | $ | 57,007 |  |  | $ | 62,827 |
Total liabilities | $ | 7,713 |  |  | $ | 8,871 |
Equity Method Investment In April 2021, the Company reorganized Meltano Inc. (“Meltano”), which started as an internal project within the Company in July 2018, into a separate legal entity. The entity was funded by the Company’s contribution of intellectual property with the fair value of approximately $0.4 million and a preferred stock financing from third parties of $4.2 million, representing 12% ownership on a fully diluted basis. On April 4, 2022, Meltano closed its Series Seed-2 round of preferred stock financing and raised $7.2 million. Pursuant to this transaction, the board composition of Meltano changed and the Company no longer has the power to appoint the majority of the board of directors of Meltano. Consequently, despite having majority voting rights at the stockholder level, the Company no longer has control over Meltano. The loss of control of a majority owned subsidiary resulted in the deconsolidation of net assets of $9.4 million and non-controlling interest of Meltano of $11.3 million, recognition of retained interest at fair value of $15.9 million, and a gain of $17.8 million recorded in other income (expense), net 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 Meltano and the Company’s share in the net assets of Meltano was attributed to equity method goodwill. Effective April 4, 2022, the Company accounts for this investment under the equity method and has recorded $11.7 million in “equity method investment” on its condensed consolidated balance sheet as of April 30, 2023. During the three months ended April 30, 2023 and 2022, the Company recognized a loss from equity method investment of $0.7 million and $0.2 million, net of tax on the condensed consolidated statements of operations, respectively. As of April 30, 2023, the Company owns 96% of the common stock in Meltano. As of April 30, 2023, Meltano has 3.1 million employee stock options and 3.1 million shares of preferred stock outstanding that are potentially dilutive equity instruments and will result in dilution to 48% in the Company’s stake in Meltano once all these instruments get converted into common stock of Meltano.

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 + Details
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