Income Taxes

12 Months Ended

Jan. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Year Ended January 31,
	2021		2022		2023
Current income provision:
State	32		5		135
Foreign	361		80		586
	393		85		721
Deferred income tax provision:
Foreign	16		(546)		458
Provision for (benefit from) income taxes	$	409	$	(461)	$	1,179

Total income tax expense differed from the amounts computed by applying the U.S. federal income tax rate to income before income tax expense as a result of the following (in thousands):

	Year Ended January 31,
	2021		2022		2023
Tax benefit at U.S. federal statutory rate(1)	$	(17,687)	$	(21,540)	$	(21,918)
State income taxes, net of federal tax benefit	(4,689)		(4,896)		(5,325)
Non-deductible expenses	85		157		3,168
Foreign tax differential	351		(752)		7
Stock-based compensation	(4,263)		(15,045)		10,730
Research and development credits	(2,561)		(2,579)		(1,839)
Change in valuation allowance	29,160		44,287		16,260
Foreign withholding taxes	—		—		82
Other	13		(93)		14
Provision for (benefit from) income taxes	$	409	$	(461)	$	1,179

(1) The statutory tax rate used in this analysis was 21% for the years ended January 31, 2021, 2022 and 2023.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands):

	As of January 31,
	2022		2023
Deferred tax assets:
Net operating loss carryforwards	$	316,381	$	313,405
Stock based compensation	11,641		9,584
Accruals and other reserves	3,880		3,760
Research and development credit carryforwards	20,397		22,236
163(j) interest limitation	10,578		12,421
174 Expense	—		17,242
Foreign acquisition costs	35		36
Lease liability	4,964		4,984
Deferred Revenue	—		904
Other	1,624		839
Gross deferred tax assets	369,500		385,411
Valuation allowance	(352,834)		(369,094)
Total deferred tax assets, net of valuation allowance	16,666		16,317
Deferred tax liabilities:
Contract acquisition costs	(8,924)		(9,014)
Capitalized software	(3,645)		(3,893)
Right-of-use assets	(4,010)		(3,751)
Basis difference in intangible assets	(313)		(351)
Total deferred tax liabilities	(16,892)		(17,009)
Net deferred tax liabilities	$	(226)	$	(692)

In assessing whether deferred tax assets should be recognized, the Company considered whether it is more-likely-than-not that some portion or all of the deferred tax assets would be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. While limited losses may be utilized due to capitalization of research and development expense, the Company determined it was more-likely-than-not that its domestic deferred tax assets would not be realized as of January 31, 2022 and 2023 and, accordingly, recorded a full valuation allowance. Net deferred tax liabilities are included in other liabilities, noncurrent on the consolidated balance sheets.

As of January 31, 2023, the Company had federal and state NOLs available to offset future taxable income, if any, of $1,166.2 million and $1,344.7 million, respectively. The federal NOLs will begin to expire in 2032. The state NOLs will expire depending upon the various rules in the states in which the Company operates. Full realization of the NOLs is dependent on generating sufficient taxable income prior to their expiration. The ability to realize the NOLs and other deferred tax assets could also be limited by previous or future changes in ownership in accordance with rules in Internal Revenue Code Sections 382 and 383.

As of January 31, 2023, the Company also had unused federal and state research and development tax credits of $22.8 million and $8.7 million, respectively. A small portion of the federal and state credits will expire depending upon the various rules in the states in which the Company operates. As of January 31, 2023, the Company also had foreign tax credits of $0.4 million which begin to expire in 2024.

During the fiscal years ended years ended January 31, 2021, 2022 and 2023, the aggregate changes in the total gross amount of unrecognized tax benefits were as follows (in thousands):

	Year Ended January 31,
	2021		2022		2023
Beginning balance	$	5,430	$	6,333	$	7,236
Increase in unrecognized tax benefits taken in prior years	939		914		663
Decrease in unrecognized tax benefits related to current year	(36)		(11)		(31)
	$	6,333	$	7,236	$	7,868

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is zero due to the valuation allowance. Any tax legislation impacting the taxability of the Company may change the unrecognized tax benefits over the next twelve months.

The Company files U.S. federal, U.S. state, and foreign tax returns and is subject to examination by various taxing authorities for all open tax years. The Company is not currently under audit by the Internal Revenue Service or any other tax authority.

The Company paid income taxes of $0.8 million, $0.6 million and $0.3 million during the years ended January 31, 2021, 2022 and 2023, respectively.