Income Taxes

9 Months Ended

Oct. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

The following table provides details of income taxes for the periods indicated:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2023			2022			2023			2022
	(in thousands)
Loss before income taxes	$	(40,065	)	$	(18,697	)	$	(108,923	)	$	(49,323	)
Provision (benefit) for income taxes		1,645			1,112			(113	)		4,958
Effective tax rate	(4.1)%			(6.0)%			0.1%			(10.1)%

The Company recorded an expense for income taxes of $1.6 million for the three months ended October 31, 2023 and a benefit for income taxes of $0.1 million for the nine months ended October 31, 2023, respectively. For the three and nine months ended October 31, 2022, the Company recorded an expense for income taxes of $1.1 million and $5.0 million, respectively. The increase in income tax expense for the three months ended October 31, 2023, as compared to the same period in the prior fiscal year, was primarily due to an increase in non-deductible stock-based compensation. The decrease in income tax expense for the nine months ended October 31, 2023 was primarily due to the tax benefit from the release of a $4.0 million valuation allowance on the deferred tax assets of Oculii Corp, or Oculii, partially offset by an increase in the proportion of profits generated in higher tax jurisdictions.

The Company periodically evaluates the realizability of its net deferred tax assets based on all available evidence, using a “more likely than not” standard. The realizability of the Company’s net deferred tax assets is dependent on its ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. During the second quarter of fiscal year 2024, based on all available positive and negative evidence, the Company determined it was appropriate to release the valuation allowance on Oculii’s US federal deferred tax assets. The Company recognized a $3.6 million tax benefit in the first half of fiscal year 2024 as a result of the valuation allowance release. The Company recognized an additional $0.4 million tax benefit during the three months ended October 31, 2023.

The Company files federal and state income tax returns in the United States and in various foreign jurisdictions. The Company’s fiscal years 2020 through 2023 are generally open and subject to potential examination by U.S. federal tax authorities. The Company’s fiscal years 2019 through 2023 are generally open and subject to potential examination by state tax authorities. The Company’s fiscal years 2016 to 2023 remain open to examination by foreign tax authorities. Fiscal years outside of the normal statute of limitations remain open to audit by tax authorities due to tax attributes generated in those earlier years, which have been carried forward and may be audited in subsequent years when utilized.

The Company regularly assesses the likelihood of adverse outcomes resulting from potential tax examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of October 31, 2023, the gross amount of unrecognized tax benefits was approximately $22.6 million. If the estimates of income tax liabilities prove to be less than the ultimate assessment, then a further charge to expense could be required. If events occur, and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities could result in tax benefits being recognized in the period in which the Company determines the liabilities are no longer necessary. The Company does not anticipate significant changes to its uncertain tax positions during the next twelve months.