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. As of July 31, 2024, the Company retains control over JiHu with its equity stake at approximately 54%.

Since fiscal year 2023, JiHu has maintained an employee stock option plan (“JiHu 2022 ESOP”) for its employees. In June 2024, the board of directors of JiHu approved a new employee stock option plan (“JiHu 2024 ESOP”) for its employees in order to grant additional shares. The fair value of restricted stock awards (“RSAs”) and stock option awards is measured on the date of grant and compensation costs related to these awards are recognized on a graded attribution method; as the grants include a performance condition for both the JiHu 2022 ESOP and JiHu 2024 ESOP (“JiHu ESOPs”).

As a result of forfeitures triggered by the departure of key executives from JiHu, during the three and six months ended July 31, 2024, the Company reversed stock-based compensation previously recorded which resulted in a $0.1 million stock-based compensation net expense and a $0.2 million net gain, respectively. As a result of forfeitures triggered by the departure of certain executives during the three and six months ended July 31, 2023, the Company reversed stock-based compensation previously recorded for such executives. The Company recorded a $0.2 million stock-based compensation net expense and a $2.7 million net gain for the three and six months ended July 31, 2023, respectively.

As of July 31, 2024, approximately $9.4 million of total unrecognized compensation cost was related to the JiHu ESOPs that is expected to be recognized over 4.1 years.

JiHu entered into two new operating leases during the six months ended July 31, 2024 and has various non-cancelable long-term operating leases maturing by May 25, 2027 with total lease payments of $0.5 million and a total present value of lease liabilities of $0.5 million. In addition, JiHu has various short-term leases. Lease expense associated with short-term leases was immaterial during the three and six months ended July 31, 2024.

The Company recognized $0.1 million and $0.3 million of operating lease expense during the three and six months ended July 31, 2024, respectively. The Company recognized $0.1 million and $0.3 million of operating lease expense during the three and six months ended July 31, 2023, respectively.

The table below presents supplemental information related to operating leases for the six months ended July 31, 2024 (in thousands, except weighted-average information):



Weighted-average remaining lease term (in years)	1.75
Weighted-average discount rate	3.5		%
Right-of-use assets obtained in exchange for new operating lease liabilities	$	372
Cash paid for amounts included in the measurement of lease liabilities	$	294


	Three Months Ended July 31,				Six Months Ended July 31,
	2024		2023		2024		2023

Revenue	$	1,775	$	1,609	$	3,421	$	3,073
Cost of revenue	535		560		1,019		1,051
Gross profit	1,240		1,049		2,402		2,022
Operating expenses:
Sales and marketing	1,410		1,960		3,046		4,044
Research and development	578		727		366		2,683
General and administrative	907		1,407		1,745		(37)
Total operating expenses	2,895		4,094		5,157		6,690
Loss from operations	(1,655)		(3,045)		(2,755)		(4,668)
Interest income	230		240		457		555
Other income (expense), net	(42)		293		305		562
Net loss before income taxes	(1,467)		(2,512)		(1,993)		(3,551)

Net loss	$	(1,467)	$	(2,512)	$	(1,993)	$	(3,551)

Net loss attributable to noncontrolling interest	$	(675)	$	(1,128)	$	(918)	$	(1,558)


	July 31, 2024		January 31, 2024

Cash and cash equivalents	$	40,756	$	43,896
Property and equipment, net	277		489
Operating lease right-of-use assets	482		405
Other assets	3,465		2,835
Total assets	$	44,980	$	47,625

Total liabilities	$	6,464	$	6,080

In April 2021, the Company reorganized Meltano Inc. (“Meltano”), now operating as Arch Data, Inc. (“Arch”), which started as an internal project within the Company in July 2018, into a separate legal entity.

The Company recorded an impairment charge of $8.9 million in other income (expense), net in the condensed 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.

During the three and six months ended July 31, 2024, the Company recorded a loss from equity method investment of zero. During the three and six months ended July 31, 2023, the Company recognized a loss from equity method investment of $0.9 million and $1.7 million, net of tax on the condensed consolidated statements of operations, respectively.