Income Taxes

12 Months Ended

Jan. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 14. Income Taxes

The components of loss before provision for income taxes were as follows (in thousands):

	Year Ended January 31,
	2022			2021			2020
United States	$	(51,497	)	$	(38,928	)	$	(104,362	)
Foreign		14,033			(3,298	)		(38,576	)
Total	$	(37,464	)	$	(42,226	)	$	(142,938	)

The components of the provision for income taxes were as follows (in thousands):

	Year Ended January 31,
	2022			2021			2020
Current:
Federal	$	—		$	—		$	—
State		245			205			196
Foreign		5,660			1,351			1,485
Total	$	5,905		$	1,556		$	1,681
Deferred:
Federal	$	124		$	83		$	—
State		—			4			32
Foreign		(2,034	)		(436	)		(303	)
Total	$	(1,910	)	$	(349	)	$	(271	)
Provision for income taxes	$	3,995		$	1,207		$	1,410

The following is a reconciliation of the difference between the effective income tax rate and the federal statutory rate of 21% (in thousands):

	Year Ended January 31,
	2022			2021			2020
Tax benefit at federal statutory rate	$	(7,867	)	$	(8,867	)	$	(30,017	)
State taxes, net of federal benefit		(2,766	)		6,798			(3,122	)
Foreign rate difference		1,213			1,676			(305	)
Nondeductible expenses		361			675			2,313
Research and development credit		(5,842	)		(6,487	)		(6,670	)
Stock-based compensation		(691	)		4,942			6,325
Change in reserve for unrecognized tax benefits		5,842			6,487			6,670
Intra-group transfer of intellectual property		1,067			—			—
Change in valuation allowance, including the effect of tax rate change		31,613			2,301			26,462
Effect of tax rate change on deferred tax assets		(19,284	)		(6,524	)		—
Other		349			206			(246	)
Total provision for income taxes	$	3,995		$	1,207		$	1,410

During the fiscal year ended January 31, 2022, the United Kingdom (UK) passed the Finance Act 2021, which increased the Corporate Income Tax (CIT) rate to 25% compared to the current rate of 19%, effective April 2023. As a result, we re-measured our UK deferred tax assets using 25% and recorded a benefit of $19.2 million, which was fully offset by a valuation allowance.

The significant components of our deferred tax assets and liabilities were as follows (in thousands):

	January 31,
	2022			2021
Deferred tax assets:
Net operating loss carryover	$	262,735		$	243,820
Accruals and reserves		7,231			7,822
Stock-based compensation		15,103			11,465
Section 59(e) capitalized research and development		27,949			19,485
Depreciation and amortization		11,939			6,618
Operating lease liabilities		51,564			59,455
Tax credit carryover		4,325			4,325
Other		1,216			1,213
Total deferred tax assets		382,062			354,203
Valuation allowance		(337,929	)		(286,659	)
Total deferred tax assets, net of valuation allowance		44,133			67,544
Deferred tax liabilities:
Operating lease right-of-use assets, net		(41,196	)		(47,949	)
Convertible debt		—			(17,322	)
Deferred commissions		(1,059	)		—
Goodwill with indefinite life amortization		(867	)		(525	)
Total deferred tax liabilities		(43,122	)		(65,796	)
Net deferred tax assets	$	1,011		$	1,748

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result, we have established a full valuation allowance against our U.S. and United Kingdom deferred tax assets to the extent they are not offset by liabilities from uncertain tax positions based on our history of losses. During the years ended January 31, 2022 and 2021, the valuation allowance increased by $51.2 million and decreased by $15.1 million, respectively.

In connection with the adoption of ASU 2020-06, we decreased the gross deferred tax liability in the amount of $17.3 million related to the tax effect of amounts no longer separately presented in equity. The net effect of the adjustments to the deferred tax liability was offset with an adjustment to the valuation allowance.

As of January 31, 2022, we had federal, state and foreign net operating loss carryforwards of $700.2 million, $571.2 million and $313.0 million, respectively, available to offset future taxable income. The federal net operating loss carryforwards generated prior to fiscal year 2019 will expire at various dates beginning in 2025, if not utilized. We have federal net operating loss carryforwards of $79.0 million, which can be carried forward indefinitely. The state net operating loss carryforwards will expire at various dates beginning in 2023, if not utilized. The foreign net operating loss carryforwards do not expire. In addition, as of January 31, 2022, we had federal and state research and development tax credit carryforwards of $44.9 million and $48.6 million, respectively. The federal research and development tax credit carryforwards will expire beginning in 2025 if not utilized. The state research and development tax credit carryforwards do not expire.

Utilization of the federal and state net operating loss may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. In the prior year, we completed a Section 382 ownership change analysis covering the fiscal year 2015 to fiscal year 2022 tax periods, which concluded that our net operating losses are not permanently limited. Subsequent ownership changes may further affect the limitation in future years.

We evaluate tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years.

A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):

	Year Ended January 31,
	2022		2021			2020
Unrecognized tax benefits—beginning of period	$	77,427	$	63,560		$	49,883
Reductions for tax positions related to prior year		40		(57	)		(10	)
Additions for tax positions related to prior year		—		48			—
Additions for tax positions related to current year		13,211		13,876			13,687
Unrecognized tax benefits—end of period	$	90,678	$	77,427		$	63,560

The gross unrecognized tax benefits, if recognized, would not materially affect the effective tax rate as of January 31, 2022, 2021 and 2020. We do not expect our gross unrecognized tax benefits to change significantly over the next 12 months.

Our policy is to classify interest and penalties associated with uncertain tax positions, if any, as a component of our income tax provision. Interest and penalties were not significant during the years ended January 31, 2022, 2021 and 2020.

We file tax returns in the U.S. for federal, California, and other states. All tax years remain open to examination for both federal and state purposes as a result of our net operating loss and credit carryforwards. We file tax returns in the United Kingdom and other foreign jurisdictions in which we operate.