Income Taxes

12 Months Ended

Jan. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The domestic and international components of the Company's loss from operations before income taxes are as follows:

	Fiscal year ended January 31,
(in thousands)	2023		2022		2021
Domestic	$	(66,194)	$	(95,062)	$	(69,953)
International	2,336		3,080		(24,642)
Loss from operations before income taxes	$	(63,858)	$	(91,982)	$	(94,595)

The Company's (provision for) benefit from income taxes is comprised of the following:

	Fiscal year ended January 31,
(in thousands)	2023		2022		2021
Current:
Federal	$	(42)	$	(9)	$	313
State	(491)		(184)		(198)
International	(732)		(884)		(1,070)
Total current	(1,265)		(1,077)		(955)
Deferred:
Federal	(4)		(4)		(28)
State	(3)		(4)		(31)
International	(808)		(192)		917
Total deferred	(815)		(200)		858
Total provision for income taxes	$	(2,080)	$	(1,277)	$	(97)

The Company’s current tax provision is primarily attributable to profitable jurisdictions outside of the United States (U.S.) and U.S. state income taxes due to mandatory capitalization of research and experimental expenditures. In the fiscal year ended January 31, 2021, the Company released a portion of its valuation allowance against certain foreign deferred tax assets resulting in an income tax benefit of $0.7 million, and recorded a U.S. tax benefit of $0.2 million due to the expiration of certain statutes of limitations of unrecognized tax benefits.

The Company reconciled its income taxes at the federal statutory income tax rate to the provision for income taxes included within its consolidated statements of operations and comprehensive loss. The Company elected to account for its Global Intangible Low-Taxed Income as an expense in the period it is incurred. The reconciliation is as follows:

	Fiscal year ended January 31,
(in thousands)	2023		2022		2021
U.S. federal tax (provision) benefit at statutory rate	$	13,410	$	19,316	$	19,865
State taxes, net of federal benefit	479		4,344		5,000
Foreign tax rate differential	(42)		(132)		(2,130)
Non-deductible expenses	(1,492)		(1,244)		(329)
Change in valuation allowance	(4,399)		(22,027)		(23,900)
Rate change	62		(66)		131
Stock-based compensation	(2,500)		(1,489)		(1,929)
Net excess tax (shortfalls) benefits from stock-based compensation	(6,498)		(990)		3,444
Return to provision adjustment	235		1,718		16
Global intangible low-taxed income	(1,096)		—		(6,129)
Intra-entity asset transfer	—		—		3,944
Other, net	(239)		(707)		1,920
Total provision for income taxes	$	(2,080)	$	(1,277)	$	(97)

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss carryforwards. The components of the Company's deferred income taxes are as follows:

	As of January 31,
(in thousands)	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	126,654	$	136,226
Stock-based compensation	5,075		7,271
Allowance for doubtful accounts	220		523
Operating lease liability	28,960		32,156
Accrued expenses	2,893		2,372
Unearned revenue	110		61
Capitalized research & experimental expenditures	12,781		—
Intangible assets	10,943		10,625
Other	169		339
Total deferred tax assets	187,805		189,573
Less: valuation allowance	(155,604)		(151,205)
Deferred tax assets, net of valuation allowance	32,201		38,368
Deferred tax liabilities:
Property and equipment	(1,411)		(2,440)
Costs to obtain revenue contracts	(9,179)		(11,041)
Operating lease right-of-use assets	(20,795)		(23,259)
Other	(877)		(874)
Total deferred tax liabilities	(32,262)		(37,614)
Net deferred tax asset (liability)	$	(61)	$	754

As of January 31, 2023, for federal income tax purposes, the Company had $460.4 million of gross U.S. federal net operating loss carryforwards, with pre-2018 net operating losses expiring starting in fiscal 2033 and others indefinitely carried forward.

As of January 31, 2023, for state income tax purposes, the Company had $22.6 million of post-apportioned, tax-effected net operating loss carryforwards, which expire in fiscal 2024 through fiscal 2041. As of January 31, 2023, the Company had $7.3 million of tax-effected foreign net operating loss carryforwards which expires starting in fiscal 2026.

Utilization of the Company’s net operating loss carryforwards in the future will be dependent upon its ability to generate taxable income and could be limited due to ownership changes, as defined under the provisions of Section 382 of the Code and similar state provisions. Utilization of the Company’s foreign net operating loss carryforwards in the future will be dependent upon the local tax law and regulation.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. During the fiscal year ended January 31, 2023, the valuation allowance had a net increase of $4.4 million from approximately $151.2 million to $155.6 million, primarily due to a decrease in U.S. deferred tax liabilities. The Company also recorded valuation allowances in certain foreign jurisdictions due to the cumulative book loss in the consolidated group. During the fiscal year ended January 31, 2022, the valuation allowance increased by $22.0 million from approximately $129.2 million to $151.2 million, primarily due to the impact of the net operating loss carryforwards established in the current period net with other changes in U.S. deferred tax assets. The Company will continue to assess the realizability of the deferred tax assets in each applicable jurisdiction going forward.

Other Considerations

U.S. income tax has not been recognized on the excess of the amount for financial reporting over the tax basis of certain investments in foreign subsidiaries that is indefinitely reinvested. The Company may be subject to state income taxes and withholding taxes upon distribution of non-U.S. earnings in the form of dividends. The Company does not believe these taxes are material.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits for the fiscal years ended January 31, 2023, 2022, and 2021 is as follows:

	Fiscal year ended January 31,
(in thousands)	2023		2022		2021
Beginning of period	$	288	$	267	$	493
Tax positions taken in prior period
Gross increases	—		—		—
Gross decreases	(272)		—		(13)
Tax positions taken in current period
Gross increases	—		20		—
Lapse of statute of limitations	—		—		(233)
Currency translation effect	(16)		1		20
End of period	$	—	$	288	$	267

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the (provision for) benefit from income taxes and recognized insignificant interest and penalties in each of the fiscal years ended January 31, 2023, 2022, and 2021. As of January 31, 2023, 2022 and 2021, accrued unrecognized tax benefits were $— million, $0.3 million and $0.3 million, respectively, and if recognized would reduce the (provision for) benefit from income taxes, and the Company's effective tax rate.

The Company is subject to income tax examinations in the United States and various state and foreign jurisdictions. The Company’s most significant operations are in the United States and the earliest open tax year subject to potential examination in the United States is 2008.