Gitlab Inc. (GTLB)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. You should review the section titled “Special Note Regarding Forward-Looking Statements” above in this Annual Report for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” in this Annual Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

A discussion regarding our financial condition and results of operations for the year ended January 31, 2025 compared to the year ended January 31, 2024 is presented below. A discussion regarding our financial condition and results of operations for the year ended January 31, 2024 compared to the year ended January 31, 2023 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024, which was filed with the SEC on March 25, 2024.

Overview

In today’s world, software defines the speed of innovation. Every industry, business, and function within a company is dependent on software. To remain competitive and survive, nearly all companies must digitally transform and become experts at developing, delivering, and securing software.

To meet these market needs, GitLab created the DevSecOps platform, a fundamentally new approach to software development and delivery. Built with a unified data model, our platform brings together all stakeholders in the software delivery lifecycle – from development teams to operations teams to security teams. With GitLab, all stakeholders can build better, more secure software, faster.

GitLab is the solution for significant business transformation needs. Across every industry – and across companies of every size – technology leaders want to make developers more productive so they can deliver better products faster; they want to measure productivity so they can increase operational efficiency; they want to secure the software supply chain so they can reduce security and compliance risk; and, they want to accelerate secure cloud migration, so they can unlock digital transformation results. These technology leaders need a platform that enables a value stream-driven mindset that shortens the time from idea to customer value and establishes a powerful flywheel for data collection and aggregation. They are looking for a platform approach that unifies the entire development experience, so that customers can outpace and out-innovate their competition.

We believe GitLab offers the shortest path to unlock technology transformation and business value. GitLab accelerates our customers’ ability to innovate by accelerating their software development from weeks to minutes. It removes the need for point tools and delivers enhanced operational efficiency by eliminating manual work, increasing productivity, and creating a culture of innovation and velocity. Embedding security earlier in the development process, GitLab enables customers to improve software security, quality, and overall compliance.

GitLab is available to any team, regardless of the size, scope, and complexity of their deployment. As a result, we have more than 50 million registered users, and more than 50% of the Fortune 100 companies are GitLab customers. For purposes of determining the number of our active customers, we look at our customers with more than $5,000 of Annual Recurring Revenue, or ARR, in a given period, who we refer to as our Base Customers. For purposes of determining our Base Customers, a single organization with separate subsidiaries, segments, or divisions that use The DevSecOps platform is considered a single customer for determining each organization’s ARR.

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GitLab is the only DevSecOps platform built on an open-core business model. We enable any customer and contributor to add functionality to our platform. In calendar year 2024, nearly 900 people contributed more than 3,000 merge requests back to the core product, extending GitLab’s in-house R&D efforts and empowering our most passionate users to make improvements to the DevSecOps solution they use every day. Our open-core approach engenders trust with our customers and enables us to maintain our high velocity of innovation.

Our transparent business value also helps us grow the open source community. We make our strategy, direction, and product roadmap available to the wider community in order to encourage and solicit their feedback. Through responsible transparency, we create a deeper level of trust with our customers and make it easier to solicit contributions and collaboration from our users and customers.

GitLab offers a flexible deployment model for our customers. For our self-managed offering, the customer installs GitLab in their own on-premise or hybrid cloud environment. For our SaaS offering, the platform is managed by GitLab and hosted either in our public cloud or in our private cloud based on the customer’s preference. We also offer GitLab Dedicated, our single tenant SaaS solution, ideally suited for organizations with complex security and compliance requirements. See the section entitled “Key Business Metrics—Dollar-Based Net Retention Rate and ARR” below for additional information about how we define ARR.

Key Business Metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.

Dollar-Based Net Retention Rate and ARR

We believe that our ability to retain and expand our revenue generated from our existing customers is an indicator of the long-term value of our customer relationships and our potential future business opportunities. Dollar-Based Net Retention Rate measures the percentage change in our ARR derived from our customer base at a point in time. Our calculation of ARR and by extension Dollar-Based Net Retention Rate, includes both self-managed and SaaS subscription revenue. We report Dollar-Based Net Retention Rate on a threshold basis of 130% each quarter or the actual number if below 130%.

We calculate ARR by taking the monthly recurring revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts of subscriptions, including our self-managed and SaaS offerings but excluding professional services. We calculate Dollar-Based Net Retention Rate as of a period end by starting with our customers as of the 12 months prior to such period end, or the Prior Period ARR. We then calculate the ARR from these customers as of the current period end, or the Current Period ARR. The calculation of Current Period ARR includes any upsells, price adjustments, user growth within a customer, contraction, and attrition. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the Dollar-Based Net Retention Rate.

Customers with ARR of $100,000 or More

We believe that our ability to increase the number of $100,000 ARR customers is an indicator of our market penetration and strategic demand for The DevSecOps platform. A single organization with separate subsidiaries, segments, or divisions that use The DevSecOps platform is considered a single customer for determining each organization’s ARR. We do not count our reseller or distributor channel

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partners as customers. In cases where customers subscribe to The DevSecOps platform through our channel partners, each end customer is counted separately.

Components of Our Results of Operations

Revenue

Subscription - self-managed and SaaS

Subscription - self-managed

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

SaaS

Our SaaS 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 offerings is recognized ratably over the contract period when the performance obligation is satisfied.

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

License - self-managed and other

The license component of our self-managed subscriptions reflects the revenue recognized by providing customers with access to proprietary software features. License revenue is recognized up-front 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 engagements. Revenue from professional services is recognized as the services are performed and control is transferred. For fixed fee engagements that include acceptance clauses, control is deemed to transfer upon customer confirmation, as defined in the respective contract. Accordingly, revenue is recognized upon satisfaction of all contractual requirements.

Cost of Revenue

Subscription - self-managed and SaaS

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, third-party payment processing fees, and allocated overhead. Personnel-related expenses consist of salaries, benefits, bonuses, and stock-based compensation. We expect our cost of revenue for self-managed and SaaS subscriptions to increase in absolute dollars as our self-managed and SaaS subscription revenue increases. As our SaaS offering makes up an increasing percentage of our total revenue, we expect to see increased associated cloud-related costs, such as hosting and managing costs, which may adversely impact our gross margins.

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License - self-managed and other

Cost of self-managed license and other revenue consists primarily of contractor and personnel-related costs, including stock-based compensation expense, associated with the professional services team and customer support team, third-party payment processing fees, and allocated overhead. We expect our cost of revenue for self-managed license and other to increase in absolute dollars as our self-managed and other revenue increases.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel-related expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include IT overhead costs.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing personnel, advertising, travel and entertainment related expenses, branding and marketing events, promotions, software subscriptions, and our allocated cloud infrastructure expenses for our free tier. Sales and marketing expenses also include sales commissions paid to our sales force. Such costs incurred on acquisition of an initial contract are capitalized and amortized over an estimated period of benefit of three years, and any such expenses paid for the renewal of a subscription are capitalized and amortized over the contractual term of the renewal. However, prorated costs for commissions that are incremental to obtain a self-managed license contract are expensed immediately.

We expect sales and marketing expenses to increase in absolute dollars as we continue to make strategic investments in our sales and marketing organization to drive additional revenue, further penetrate the market, and expand our global customer base, but to decrease as a percentage of our total revenue over time, although our sales and marketing expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

Research and Development

Research and development expenses consist primarily of personnel-related expenses, including contractors, as well as cloud infrastructure expenses to support our internal development efforts, and software and subscription services. Costs related to research and development are expensed as incurred.

We expect research and development expenses to increase in absolute dollars as we continue to increase investments in our existing products and services. However, we anticipate research and development expenses to decrease as a percentage of our total revenue over time, although our research and development expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for our executives, finance, legal, and human resources teams. General and administrative expenses also include external legal, accounting, and director and officer insurance, as well as other consulting and professional services fees, software and subscription services, in-person company-wide event expenses, and any contract termination fees.

We incur expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, costs related to Sarbanes-Oxley compliance, and expenses for insurance, investor relations, and related professional services. We expect that our general and administrative expenses will increase in absolute dollars as our business grows but will decrease as a

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percentage of our total revenue over time, although our general and administrative expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

Interest Income, and Other Income (Expense), Net

Interest income consists primarily of interest earned on our cash equivalents and short-term investments.

Other income (expense), net consists primarily of foreign currency transaction gains and losses.

Loss from Equity Method Investment, Net of Tax

Loss from equity method investment, net of tax, consists of our share of losses from the results of operations of Arch, following its deconsolidation.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes in the foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance against our deferred tax assets in certain jurisdictions because we have concluded that it is not more likely than not that the deferred tax assets will be realized.

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Results of Operations

The following table sets forth our results of operations for the periods presented (in thousands):

(1)Includes stock-based compensation expense as follows:

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(2)Our results of operations include our variable interest entity, JiHu. The ownership interest of other investors is recorded as a noncontrolling interest. See “Note 11. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

The following table sets forth the components of our consolidated statements of operations as a percentage of total revenue for each of the periods presented:

Comparison of the Fiscal Year Ended January 31, 2025 and 2024

Revenue

Revenue increased $179.3 million, or 31%, to $759.2 million for fiscal year 2025 from $579.9 million for fiscal year 2024. The increase was primarily due to the ongoing demand for The DevSecOps platform, including adding new customers, the expansion within our existing paid customers, and an increase in our number of customers with $100,000 or greater in ARR. As of January 31, 2025 and 2024, our expansion

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is reflected by our Dollar-Based Net Retention Rate being 123% and 130%, respectively. We had 1,229 customers with ARR over $100,000 as of January 31, 2025, increasing from 955 customers with ARR over $100,000 as of January 31, 2024.

Revenue attributed to our variable interest entity, JiHu, was $7.6 million and $6.5 million for fiscal year 2025 and 2024, respectively. See “Note 11. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue increased by $25.4 million, to $85.1 million for fiscal year 2025 from $59.7 million for fiscal year 2024, primarily due to an increase of $7.9 million in third party hosting costs for SaaS and cloud usage, an increase of $6.9 million in personnel-related expenses, driven by an increase in our average customer support and professional services headcount and an increase of $1.5 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below), and $6.1 million in the amortization of intangible assets. Gross margin decreased by 1% to 89% for fiscal year 2025 compared to fiscal year 2024.

Cost of revenue attributed to our variable interest entity, JiHu, was $2.3 million and $2.4 million for fiscal year 2025 and 2024, respectively. See “Note 11. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

Sales and Marketing

Sales and marketing expenses increased by $27.9 million, to $384.3 million for fiscal year 2025 from $356.4 million for fiscal year 2024, primarily due to an increase of $28.6 million in personnel-related expenses, driven by an increase in our average sales and marketing headcount and an increase of $4.2 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below), partially offset by a $2.7 million decrease in restructuring expense.

Sales and marketing expenses attributed to our variable interest entity, JiHu, were $6.3 million and $7.4 million for fiscal year 2025 and 2024, respectively. See “Note 11. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

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Research and Development

Research and development expenses increased by $38.8 million, to $239.7 million for fiscal year 2025 from $200.8 million for fiscal year 2024, primarily due to an increase of $34.3 million in personnel-related expenses, driven by an increase in our average research and development headcount and an increase of $7.5 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below). The remaining change was mainly due to an increase of $4.1 million in hosting costs for internal usage partially offset by a decrease of $1.7 million in restructuring costs.

Research and development expenses attributed to our variable interest entity, JiHu, were $1.8 million and $5.3 million for fiscal year 2025 and 2024, respectively. See “Note 11. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

General and Administrative

General and administrative expenses increased by $42.5 million, to $192.9 million for fiscal year 2025 from $150.4 million for fiscal year 2024, primarily driven by an increase in expense of $14.3 million related to our in-person company-wide event, $11.0 million in personnel-related expenses, mainly attributable to an increase in our average general and administrative headcount and an increase of $9.6 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below). Other factors contributing to the increase included $3.9 million from an accrual for indirect taxes on certain international sales, $3.8 million from a loss attributable to the fair value remeasurement of acquisition related contingent consideration, $2.4 million in consulting expenses, $1.7M in acquisition related expenses and $1.1 million in charitable donation of common stock.

General and administrative expenses attributed to our variable interest entity, JiHu, were $4.5 million and $1.9 million for fiscal year 2025 and 2024, respectively. See “Note 11. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

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Stock-Based Compensation Expense

Stock-based compensation expense increased by $22.9 million, to $185.9 million for fiscal year 2025 from $163.0 million for fiscal year 2024, primarily due to an increase of $39.6 million of expense from RSUs, offset by decreases of $4.2 million for grant modifications, $7.3 million related to our ESPP, and $5.7 million related to stock options.

Stock-based compensation attributed to our variable interest entity, JiHu, was a net expense of $1.8 million and a net gain of $1.5 million for fiscal 2025 and 2024, respectively. See “Note 11. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

Interest Income and Other Income (Expense), Net

For fiscal year 2025 compared to fiscal year 2024, interest income increased primarily due to income earned from our cash equivalents and short-term investments as a result of higher interest rates during fiscal year 2025 compared to fiscal year 2024.

The increase in other income (expense), net is mainly due the increase in interest income, an increase in foreign exchange gains and impairment loss of equity method investment in fiscal year 2024. The increase in foreign exchange gains is primarily related to the revaluation of non-functional currency denominated monetary assets and liabilities, and realized foreign exchange gain upon the payment of the BAPA tax assessment in fiscal year 2025.

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Loss from Equity Method Investment, Net of Tax

We 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 equity method investment value to zero as of January 31, 2024. As a result there is no loss from equity method investment for fiscal year 2025.

Provision for (Benefit from) Income Taxes

Our effective tax rate increased by approximately 254.5% for fiscal year 2025 as compared to fiscal year 2024. A tax benefit is expressed as a positive rate because of our pretax loss. The increase in tax benefit was primarily due to the tax effects of the BAPA negotiations between the United States and Dutch tax authorities, as well as the execution of an agreement between GitLab B.V. and the Dutch tax authority to reduce the rate of tax imposed on the tax gain recognized upon the transfer of the economic rights of the Company’s intellectual property from the Netherlands to the United States.

Our effective tax rate for the year ended January 31, 2025 was higher than the U.S. federal statutory tax rate of 21%, primarily due to the tax effects of the BAPA negotiations between the United States and Dutch tax authorities, and the Company’s foreign and domestic operations.

We executed the BAPA agreements with the U.S. and Dutch tax authorities on October 10, 2024, and October 22, 2024, respectively. On October 28, 2024, we paid the tax assessment issued by the Dutch Tax Authority, or the DTA, which reflected the BAPA negotiations and the agreement to reduce the rate of tax on the gain from the transfer of economic IP rights. As a result of the BAPA and Dutch assessment, the 2015 through 2017 tax years are closed for GitLab B.V. Pursuant to the terms in the BAPA, the Company will file amended returns for the 2018 through 2023 fiscal years; the tax returns for the fiscal year ended January 31, 2024 were not yet due as of the end of the current fiscal year. All U.S. federal and state tax net operating losses (“NOLs”) and credits, as well as Netherlands NOLs, are not yet recognized due to the determination that they are not more likely than not to be realized.

Under the provisions of ASC 740, Income Taxes, the determination of our ability to recognize our deferred tax assets requires an assessment of both negative and positive evidence when determining our ability to recognize deferred tax assets. Consistent with prior years, we maintain that it is not more likely than not that we can recognize deferred tax assets in certain jurisdictions. The evidence we evaluated included operating results during the most recent three-year period and future projections. More weight is 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

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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.

As of January 31, 2025, our U.S. federal 2018 through 2024 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. Our Netherlands tax years are currently open for the tax years from 2018 to 2024, subject to adjustments as a result of the recently negotiated BAPA. We believe that we have adequately reserved for the outcome of the BAPA. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue 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, 2025, unrecognized tax benefits were $25.6 million, of which $9.5 million would affect the effective tax rate if recognized. As of January 31, 2024, the unrecognized tax benefits were $402.7 million, of which $213.7 million would affect the effective tax rate if recognized. We have settled and paid the BAPA tax liability with the DTA, thereby reducing the current tax liability previously classified as an unrecognized tax benefit to an immaterial amount. For unrecognized tax benefits unrelated to the BAPA, we are unable to reasonably estimate the timing of the remaining long-term payments or the amount by which the liability will increase or decrease.

It is our policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. For the years ended January 31, 2025, 2024 and 2023, the Company recognized interest and penalties of $5.3 million, $56.3 million and $1.3 million, respectively.

Liquidity and Capital Resources

Since inception, we have financed operations primarily through proceeds received from issuances of equity securities, preferred stock and payments received from our customers.

As of January 31, 2025 and January 31, 2024, our principal source of liquidity was cash, cash equivalents, and short-term investments aggregating to $992.4 million and $1.0 billion, respectively, which were held for working capital and strategic investment purposes. As of January 31, 2025, cash and cash equivalents consist of cash in banks, money markets funds, treasuries, and commercial paper, while short-term investments mainly consist of treasuries, corporate debt securities, agency securities, and commercial paper.

We believe that our existing cash, cash equivalents, and short-term investments will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the price at which we are able to procure third-party cloud infrastructure, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of The DevSecOps platform. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operating results, and financial condition.

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The following table shows a summary of our cash flows for the periods presented:

Operating Activities

Our largest source of operating cash is payments received from our customers. Our primary uses of cash from operating activities are for personnel-related expenses, sales and marketing expenses, third-party cloud infrastructure expenses, and overhead expenses. We have generated positive cash flows in fiscal year 2024 and negative cash flows in fiscal years 2025 and 2023 from operating activities. We have supplemented working capital through net proceeds from the issuance of equity securities.

Cash used in operating activities during the year ended January 31, 2025 was $64.0 million, primarily consisting of our net loss of $9.1 million, adjusted for non-cash items of $236.8 million (mainly attributable to stock-based compensation expense of $185.9 million and amortization of deferred contract acquisition costs, net of $49.7 million), and net cash outflows of $291.7 million used in changes of our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were the increase of accounts receivable of $99.6 million, the increase in deferred contract acquisition costs of $58.1 million, the decrease in accrued expenses and other liabilities of $253.4 million (mainly attributable to $187.7 million for the BAPA payment), and the decrease in other non-current liabilities of $7.8 million, partially offset by the decrease in prepaid expenses and other current assets of $8.4 million, the increase in accrued compensation and related expenses of $4.7 million, and the increase in deferred revenue of $108.7 million. These changes primarily reflect our strong sales growth driving higher accounts receivable, and increased deferred contract acquisition costs, the aforementioned BAPA payment impact driving lower accrued expenses and other liabilities, and continued expansion of our customer subscription base leading to increased deferred revenue.

Cash provided by operating activities during the year ended January 31, 2024 was $35.0 million, primarily consisting of our net loss of $429.5 million, adjusted for non-cash items of $222.2 million (mainly attributable to stock-based compensation expense of $163.0 million and amortization of deferred contract acquisition costs, net of $43.5 million), and net cash inflows of $242.3 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were the increase in accrued expenses and other liabilities of $259.4 million, the increase in deferred revenue of $79.3 million and the increase in accrued compensation and related expenses of $15.2 million, partially offset by the increase in deferred contract acquisition costs of $53.1 million, the increase in accounts receivable of $36.3 million, and the increase in prepaid expenses and other current assets of $23.7 million.

Investing Activities

Cash used in investing activities during the year ended January 31, 2025 was $30.5 million, primarily consisting of a $20.2 million payment for a business combination, net of cash acquired, a $7.7 million payment for an asset acquisition, and $3.8 million in purchases of property and equipment, partially offset by $0.7 million in proceeds from maturities, net of purchases of short-term investments.

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Cash used in investing activities during the year ended January 31, 2024 was $86.2 million, primarily consisting of $81.7 million in purchases of short-term investments, net of proceeds from maturities, $2.5 million outflow as a result of an escrow payment related to a prior business combination, $1.6 million in purchases of property and equipment, and $0.5 million of other investing activities.

Financing Activities

Cash provided by financing activities during the year ended January 31, 2025 was $32.6 million, attributable to $24.0 million proceeds from the issuance of common stock upon stock options exercises, and $13.6 million of proceeds from the issuance of common stock under the ESPP, partially offset by $4.9 million for the settlement of acquisition related contingent cash consideration.

Cash provided by financing activities during the year ended January 31, 2024 was $45.2 million, attributable to $32.3 million of proceeds from the issuance of common stock upon stock options exercises, and $12.9 million of proceeds from the issuance of common stock under the ESPP.

Adjusted Free Cash Flow

Adjusted free cash flow is a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities less cash used for purchases of property and equipment, plus any non-recurring income tax payments related to BAPA, plus any non-recurring payments related to the formation of JiHu. We believe that adjusted free cash flow is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our operations that, after the investments in property and equipment, any non-recurring income tax payments related to BAPA, and any non-recurring payments related to the formation of JiHu, can be used for strategic initiatives, including investing in our business, and strengthening our financial position. One limitation of adjusted free cash flow is that it does not reflect our future contractual commitments. Additionally, adjusted free cash flow does not represent the total increase or decrease in our cash balance for a given period.

The following table presents a reconciliation of adjusted free cash flow to net cash provided by (used in) operating activities, the most directly comparable financial measure calculated in accordance with GAAP, for the periods presented (in thousands):

(1) No non-recurring payments related to the formation of JiHu were recorded during the periods presented.

Contractual Obligations and Commitments

For more information regarding our contractual obligations, refer to “Note 14. Commitments and Contingencies” to our consolidated financial statements.

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Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We believe our judgments and estimates associated with the determination of standalone selling price for each performance obligation in revenue recognition, which we discuss further below, could have a material impact on our consolidated financial statements.

See “Note 2. Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements for a summary of significant accounting policies and the effect on our financial statements.

Revenue Recognition

For contracts that contain multiple performance obligations, we allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price or SSP for each performance obligation. We use judgment in determining SSP for our products and services. 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.

Self-managed subscriptions include both (i) a right to use the underlying software and (ii) a right to receive post-contract customer support during the subscription term. Post-contract customer support comprises maintenance services (including updates and upgrades to the software on a when and if available basis) and support services. We have 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, we estimate the stand-alone selling price for each performance obligation using a model based on the “expected cost plus margin” approach and update the model on an annual basis or when facts and circumstances change. 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, we determined the SSP allocation for each of our paid tiers across various subscription tenures.

Compensation Recovery Analysis

As disclosed in “Note 2. Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements, this Form 10-K reflects our identification and correction of certain errors in our prior year financial statements. The Compensation Committee of our Board of Directors, consisting entirely of independent directors, conducted a recovery analysis of incentive-based compensation received by our executive officers during the relevant period, as contemplated by Rule 10D-1 under the Exchange Act and in accordance with our Executive Officer Clawback Policy. Based on this analysis, no recovery of incentive-based compensation is required, as the financial statement adjustments did not impact the metrics used to determine incentive compensation during the relevant recovery period, and thus there was no erroneously awarded compensation.

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Recently Issued Accounting Pronouncements

See “Note 2. Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report for more information regarding recently issued accounting pronouncements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. You should review the section titled “Special Note Regarding Forward-Looking Statements” above in this Annual Report for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” in this Annual Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

A discussion regarding our financial condition and results of operations for the year ended January 31, 2024 compared to the year ended January 31, 2023 is presented below. A discussion regarding our financial condition and results of operations for the year ended January 31, 2023 compared to the year ended January 31, 2022 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, which was filed with the SEC on March 30, 2023.

Overview

In today’s world, software defines the speed of innovation. Every industry, business, and every function within a company is dependent on software. Nearly all companies must digitally transform and become experts at building, delivering, and securing software to remain competitive and survive.

To meet these market needs, GitLab pioneered The DevSecOps Platform, a fundamentally new approach to software development and delivery. Our platform is uniquely built as a single application with native artificial intelligence, or AI, assisted workflows, and a single interface with a unified data model, enabling all stakeholders in the software delivery lifecycle – from development teams to operations teams to security teams – to work together in a single tool with a single workflow. With GitLab, they can build better, more secure software, faster.

GitLab is the solution to significant business transformation needs. Across every industry – and across companies of every size – technology leaders want to make developers more productive so they can deliver better products faster; they want to measure productivity so they can increase operational efficiency; they want to secure the software supply chain so they can reduce security and compliance risk; and, they want to accelerate secure cloud migration, so they can unlock digital transformation results. These technology leaders need a platform that enables a value stream-driven mindset that shortens the time from idea to customer value and establishes a powerful flywheel for data collection and aggregation. And they are looking for a platform approach that unifies the entire development experience, so that customers can be faster than their competition in moving from idea to customer value.

We believe GitLab is the shortest path to unlocking business and technology transformation results. Our DevSecOps platform accelerates our customers’ ability to create business value and innovate by reducing their software development cycle times from weeks to minutes – achieving up to 7x faster cycle time. It removes the need for point tools and delivers enhanced operational efficiency by eliminating manual work, increasing productivity, and creating a culture of innovation and velocity. GitLab also embeds security earlier into the development process, improving our customers’ software security, quality, and overall compliance.

GitLab is available to any team, regardless of the size, scope, and complexity of their deployment. As a result, we have more than 30 million registered users, and more than 50% of the Fortune 100 companies are GitLab customers. For purposes of determining the number of our active customers, we look at our customers with more than $5,000 of Annual Recurring Revenue, or ARR, in a given period, who we refer to as our Base Customers. For purposes of determining our Base Customers, a single

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organization with separate subsidiaries, segments, or divisions that use The DevSecOps Platform is considered a single customer for determining each organization’s ARR.

GitLab is the only DevSecOps platform built on an open-core business model. We enable any customer and contributor to add functionality to our platform. In calendar year 2023, nearly 700 people contributed more than 2,100 merge requests back to the core product, extending GitLab’s in-house R&D efforts and empowering our most passionate users to make improvements to the DevOps tool they use every day. Our open-core approach has enabled us to build trust with our customers and maintain our high velocity of innovation so that we can rapidly create the most comprehensive DevSecOps platform.

GitLab largely exists today thanks to the vast and growing community of open source contributors worldwide. We actively work to grow open source community engagement by operating with transparency. We make our strategy, direction, and product roadmap available to the wider community, where we encourage and solicit their feedback. By making non-sensitive information public, we create a deeper level of trust with our customers and make it easier to solicit contributions and collaboration from our users and customers. See the section entitled “Key Business Metrics—Dollar-Based Net Retention Rate and ARR” below for additional information about how we define ARR.

We make our plans available through our self-managed and software-as-a-service (SaaS) offering. For our self-managed offering, the customer installs GitLab in their own on-premise or hybrid cloud environment. For our SaaS offering, the platform is managed by GitLab and hosted either in our public cloud or in our private cloud based on the customer’s preference.

Key Business Metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.

Dollar-Based Net Retention Rate

We believe that our ability to retain and expand our revenue generated from our existing customers is an indicator of the long-term value of our customer relationships and our potential future business opportunities. Dollar-Based Net Retention Rate measures the percentage change in our ARR derived from our customer base at a point in time. Our calculation of ARR and by extension Dollar-Based Net Retention Rate, includes both self-managed and SaaS subscription revenue. We report Dollar-Based Net Retention Rate on a threshold basis of 130% each quarter or the actual number if below 130%.

We calculate ARR by taking the monthly recurring revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts of subscriptions, including our self-managed and SaaS offerings but excluding professional services. We calculate Dollar-Based Net Retention Rate as of a period end by starting with our customers as of the 12 months prior to such period end, or the Prior Period ARR. We then calculate the ARR from these customers as of the current period end, or the Current Period ARR. The calculation of Current Period ARR includes any upsells, price adjustments, user growth within a customer, contraction, and attrition. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the Dollar-Based Net Retention Rate.

Customers with ARR of $100,000 or More

We believe that our ability to increase the number of $100,000 ARR customers is an indicator of our market penetration and strategic demand for The DevSecOps Platform. A single organization with separate subsidiaries, segments, or divisions that use The DevSecOps Platform is considered a single

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customer for determining each organization’s ARR. We do not count our reseller or distributor channel partners as customers. In cases where customers subscribe to The DevSecOps Platform through our channel partners, each end customer is counted separately.

Components of Our Results of Operations

Revenue

Subscription - self-managed and SaaS

Subscription - self-managed

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

SaaS

Our SaaS 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 offerings 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.

License - self-managed and other

The license component of our self-managed subscriptions reflects the revenue recognized by providing customers with access to proprietary software features. License revenue is recognized up-front 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, 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.

Cost of Revenue

Subscription - self-managed and SaaS

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. We expect our cost of revenue for self-managed and SaaS subscriptions to increase in absolute dollars as our self-managed and SaaS subscription revenue increases. As our SaaS offering makes up an increasing percentage of our total revenue, we expect to see increased associated cloud-related costs, such as hosting and managing costs, which may adversely impact our gross margins.

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License - self-managed and other

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. We expect our cost of revenue for self-managed license and other to increase in absolute dollars as our self-managed and other revenue increases.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel-related expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include IT overhead costs.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing personnel, advertising, travel and entertainment related expenses, branding and marketing events, promotions, software subscriptions, and our allocated cloud infrastructure expenses for our free tier. Sales and marketing expenses also include sales commissions paid to our sales force. Such costs incurred on acquisition of an initial contract are capitalized and amortized over an estimated period of benefit of three years, and any such expenses paid for the renewal of a subscription are capitalized and amortized over the contractual term of the renewal. However, prorated costs for commissions that are incremental to obtain a self-managed license contract are expensed immediately.

We expect sales and marketing expenses to increase in absolute dollars as we continue to make strategic investments in our sales and marketing organization to drive additional revenue, further penetrate the market, and expand our global customer base, but to decrease as a percentage of our total revenue over time, although our sales and marketing expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

Research and Development

Research and development expenses consist primarily of personnel-related expenses, including contractors, as well as cloud infrastructure expenses to support our internal development efforts, and software and subscription services. Costs related to research and development are expensed as incurred.

We expect research and development expenses to increase in absolute dollars as we continue to increase investments in our existing products and services. However, we anticipate research and development expenses to decrease as a percentage of our total revenue over time, although our research and development expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for our executives, finance, legal, and human resources teams. General and administrative expenses also include external legal, accounting, and director and officer insurance, as well as other consulting and professional services fees, software and subscription services, corporate event expenses, and any contract termination fees.

We incur expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, costs related to Sarbanes-Oxley compliance, costs related to Environmental, Social, and Governance (ESG) compliance and expenses for insurance, investor relations, and related professional services. We expect that our general and administrative expenses will

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increase in absolute dollars as our business grows but will decrease as a percentage of our total revenue over time, although our general and administrative expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

Interest Income, and Other Income (Expense), Net

Interest income consists primarily of interest earned on our cash equivalents and short-term investments.

Other income (expense), net consists primarily of the gain from the deconsolidation of Arch Data Inc. (“Arch”), formerly Meltano Inc. in fiscal 2023 and impairment loss of equity method investment in Arch in fiscal 2024, as well as foreign currency transaction gains and losses.

Loss from Equity Method Investment, Net of Tax

Loss from equity method investment, net of tax, consists of our share of losses from the results of operations of Arch, following its deconsolidation.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes in the foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance against our deferred tax assets in certain jurisdictions because we have concluded that it is not more likely than not that the deferred tax assets will be realized.

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Results of Operations

The following table sets forth our results of operations for the periods presented (in thousands):

(1)Includes stock-based compensation expense as follows:

(2)Includes $8.9 million loss for the year ended January 31, 2024 from the impairment of Arch Data Inc. (“Arch”), formerly Meltano, and $17.8 million gain for the year ended January 31, 2023 from the deconsolidation of Arch in

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April 2022. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

(3)Our results of operations include our variable interest entity, JiHu. The ownership interest of other investors is recorded as a noncontrolling interest. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

The following table sets forth the components of our consolidated statements of operations as a percentage of total revenue for each of the periods presented:

Comparison of Fiscal Year Ended January 31, 2024 and 2023

Revenue

Revenue increased $155.6 million, or 37%, to $579.9 million for fiscal 2024 from $424.3 million for fiscal 2023. The increase was primarily due to the ongoing demand for The DevSecOps Platform, including adding new customers, the expansion within our existing paid customers, and an increase in our number of customers with $100,000 or greater in ARR. As of January 31, 2024 and 2023, our expansion is reflected by our Dollar-Based Net Retention Rate being 130% and above 130%, respectively. We had

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955 customers with ARR over $100,000 as of January 31, 2024, increasing from 697 customers with ARR over $100,000 as of January 31, 2023.

Revenue attributed to our variable interest entity, JiHu, was $6.5 million and $4.7 million for fiscal 2024 and 2023, respectively. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue increased by $8.0 million, to $59.7 million for fiscal 2024 from $51.7 million for fiscal 2023, primarily due to an increase of $3.4 million in personnel-related expenses, driven by an increase in our average customer support and professional services headcount and an increase of $1.3 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below). The remaining change was primarily attributable to an increase of $2.8 million in third-party hosting costs for increased SaaS and cloud usage and $0.5 million in one-time restructuring expenses. Gross margin improved by 2% to 90% for fiscal 2024 from 88% in fiscal 2023.

Cost of revenue attributed to our variable interest entity, JiHu, was $2.4 million and $1.7 million for fiscal 2024 and 2023, respectively. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

Sales and Marketing

Sales and marketing expenses increased by $46.4 million, to $356.4 million for fiscal 2024 from $310.0 million for fiscal 2023, primarily due to an increase of $39.7 million in personnel-related expenses, driven by an increase in our average sales and marketing headcount, and an increase of $20.8 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below). The remaining change was mainly due to an increase of $4.5 million in marketing spend and $3.8 million in one-time restructuring costs, offset by a decrease of $0.7 million in allocated cloud infrastructure expenses for our free tier.

Sales and marketing expenses attributed to our variable interest entity, JiHu, were $7.4 million and $7.7 million for fiscal 2024 and 2023, respectively. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

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Research and Development

Research and development expenses increased by $44.7 million, to $200.8 million for fiscal 2024 from $156.1 million for fiscal 2023, primarily due to an increase of $32.9 million in personnel-related expenses, driven by an increase in our average research and development headcount and an increase of $14.5 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below). The remaining change was mainly due to an increase of $3.8 million in cloud infrastructure costs for internal usage, an increase of $2.1 million in software and consulting expenses, and $2.1 million in one-time restructuring costs.

Research and development expenses attributed to our variable interest entity, JiHu, were $5.3 million and $6.8 million for fiscal 2024 and 2023, respectively. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

General and Administrative

General and administrative expenses increased by $32.5 million, to $150.4 million for fiscal 2024 from $117.9 million for fiscal 2023, primarily due to an increase of $17.7 million in personnel-related expenses, mainly attributable to an increase in our average general and administrative headcount and an increase of $3.9 million in stock-based compensation expenses (as discussed in the section titled “Stock-Based Compensation Expense” below). The remaining change was primarily driven by an increase of $10.7 million in charitable donations of common stock, an increase of $4.3 million in software and consulting expenses to support our growth, $1.6 million in one-time restructuring costs, partially offset by a decrease of $3.5 million from a one-time event cancellation fee in fiscal 2023.

General and administrative expenses attributed to our variable interest entity, JiHu, were $1.9 million and $10.5 million for fiscal 2024 and 2023, respectively. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

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Stock-Based Compensation Expense

Stock-based compensation expense increased by $40.5 million, to $163.0 million for fiscal 2024 from $122.6 million for fiscal 2023, primarily due to an increase of $56.0 million of expense from RSUs, offset by a decrease of $6.6 million related to our ESPP and a decrease of $9.2 million in the stock-based compensation of our variable interest entity.

Stock-based compensation expense attributed to our variable interest entity, JiHu, was a $1.5 million gain and $7.8 million loss for fiscal 2024 and 2023, respectively. See “Note 12. Joint Venture and Equity Method Investment” to our consolidated financial statements for additional details.

Interest Income and Other Income (Expense), Net

For fiscal 2024 compared to fiscal 2023, interest income increased primarily due to income earned from our cash equivalents and short-term investments as a result of investing the proceeds from our initial public offering, or IPO, into marketable securities as well as higher interest rates during fiscal 2024 compared to fiscal 2023.

The change in other income (expense), net is primarily due to the recognized gain of $17.8 million on the deconsolidation of Arch Data Inc. (“Arch”), formerly Meltano, during fiscal 2023. During fiscal 2024, the Company recorded an impairment charge for Arch of $8.9 million in other income (expense), net. The remaining change in other income (expense), net is mainly due to currency exchange gains and losses.

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Loss from Equity Method Investment, Net of Tax

Loss from equity method investment, net of tax consists of our share of losses from the results of operations of Arch, formerly Meltano. Effective April 4, 2022, due to a loss of control over Arch, we account for Arch investment under the equity method.

Provision for Income Taxes

Our tax expense increased by approximately $261.2 million for fiscal 2024 as compared to fiscal 2023. The higher tax expense was primarily due to the tax effects of the bilateral advance pricing agreement negotiations (“BAPA”) between the United States and Dutch taxing authorities, and the Company's foreign and domestic operations.

Our effective tax rate for fiscal 2024 was higher than the U.S. federal statutory tax rate of 21%, primarily due to the additional tax liabilities relating to the anticipated BAPA, an increase in valuation allowance associated with tax attributes generated during the year, and non-deductible expenses.

Under the provisions of ASC 740, Income Taxes, the determination of our ability to recognize our deferred tax assets requires an assessment of both negative and positive evidence when determining our ability to recognize deferred tax assets. Consistent with prior years, we maintain that it is not more likely than not that we can recognize deferred tax assets in certain jurisdictions. The evidence we evaluated included operating results during the most recent three-year period and future projections. More weight is 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.

We have not recorded a provision for deferred U.S. tax expense that could result from the remittance of foreign undistributed earnings since we intend to reinvest the earnings of the foreign subsidiaries indefinitely. The undistributed earnings of foreign corporations not included in our 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.

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We have been in BAPA negotiations between the United States Internal Revenue Service (“IRS”) and the Dutch Tax Authority (“DTA”) relating to our transfer pricing arrangements between the United States and the Netherlands. In the year ended January 31, 2024, we discussed for the first time 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 us, the IRS and the DTA are not yet final; in anticipation of an agreement, $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 our best estimate of the tax expense associated with the proposed agreements and their related effects.

As of January 31, 2024, our U.S. federal 2018 through 2022 tax years were open and the results from such tax years remained 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. We are currently under examination in the Netherlands for the 2015 and 2016 tax years. We expect negotiations to continue to the middle of fiscal 2025. We believe that we have adequately reserved for the outcome of the Netherlands examination. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue 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 were $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.

It is our policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. Accrued interest and penalties were $52.1 million as of January 31, 2024 and $0.2 million as of January 31, 2023.

Liquidity and Capital Resources

Since inception, we have financed operations primarily through proceeds received from issuances of equity securities, preferred stock and payments received from our customers.

As of January 31, 2024 and January 31, 2023, our principal source of liquidity was cash, cash equivalents, and short-term investments aggregating to $1.0 billion and $936.7 million, respectively, which were held for working capital and strategic investment purposes. As of January 31, 2024, cash and cash equivalents consist of cash in banks, money markets funds, agency securities, treasuries, and corporate debt securities, while short-term investments mainly consist of treasuries, corporate debt securities, and commercial paper.

We believe that our existing cash, cash equivalents, and short-term investments will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the price at which we are able to procure third-party cloud infrastructure, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of The DevSecOps Platform. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and

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invest in continued innovation, we may not be able to compete successfully, which would harm our business, operating results, and financial condition.

The following table shows a summary of our cash flows for the periods presented: