Income Taxes

12 Months Ended

Jan. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Our loss before provision for income taxes for fiscal 2023, 2022 and 2021 consisted of the following (in thousands):

	Year Ended January 31,
	2023		2022		2021
Domestic	$	(432,235)	$	(274,270)	$	(18,159)
Foreign	47,944		4,173		(98,954)
Loss before provision for income taxes	$	(384,291)	$	(270,097)	$	(117,113)

The components of provision for income taxes for fiscal 2023, 2022 and 2021 consisted of the following (in thousands):

	Year Ended January 31,
	2023		2022		2021
Current:
State	$	53	$	82	$	62
Foreign	3,661		1,011		398
Total current	3,714		1,093		460
Deferred:
Federal	(6,754)		—		—
State	(2,913)		—		—
Foreign	340		(89)		—
Total deferred	(9,327)		(89)		—
Total provision for income taxes	$	(5,613)	$	1,004	$	460

A reconciliation of the expected provision for (benefit from) income taxes at the statutory federal income tax rate to our recorded provision for income taxes consisted of the following (in thousands):

	Year Ended January 31,
	2023		2022		2021
Benefit from income taxes at U.S. federal statutory rate	$	(80,701)	$	(56,720)	$	(24,594)
State taxes, net of federal benefit	53		82		49
Foreign tax rate differential	10,140		(1,297)		(1,836)
Stock-based compensation	2,734		(23,442)		1,195
Non-deductible expenses	1,780		322		84
Change in valuation allowance	60,145		81,739		25,564
Other	236		320		(2)
Total provision for (benefit from) income taxes	$	(5,613)	$	1,004	$	460

Significant components of our net deferred tax assets and liabilities as of January 31, 2023 and 2022 consisted of the following (in thousands):

	As of January 31,
	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	228,400	$	174,646
Research and development expenses	72,432		36,989
Deferred revenue	25,643		14,748
Accruals and reserves	6,215		3,960
Operating lease liabilities	9,139		11,158
Stock-based compensation	17,528		7,936
Other	2,622		2,012
Gross deferred tax assets	361,979		251,449
Valuation allowance	(291,751)		(218,981)
Total deferred tax assets	70,228		32,468
Deferred tax liabilities:
Acquired intangibles, property and equipment	(37,170)		(6,235)
Deferred contract acquisition costs	(22,868)		(16,722)
Operating lease right-of-use assets	(8,162)		(9,422)
Other	(2,279)		—
Total deferred tax liabilities	(70,479)		(32,379)
Net deferred tax assets (liabilities)	$	(251)	$	89

Based upon available objective evidence, we believe it is more likely than not that the net U.S. and Israel deferred tax assets will not be fully realizable. Accordingly, we have established a valuation allowance for the U.S. and Israel gross deferred tax assets. As of January 31, 2023 and 2022, we had a valuation allowance of $291.8 million and $219.0 million, respectively, against our deferred tax assets. During fiscal 2023 and 2022, total valuation allowance increased by $72.8 million and $132.9 million, respectively, primarily due to additional net operating losses.

As of January 31, 2023, we had federal net operating loss carryforwards of $651.1 million, which will begin to expire in 2031, and state net operating loss carryforwards of $338.3 million, which will begin to expire in 2024. We also had foreign net operating loss carryforwards of $289.8 million, which do not expire.

In addition, we had federal research and development credit carryforwards of $2.0 million, which will begin to expire in 2037, and state research and development credit carryforwards of $2.0 million, which do not expire.

Federal and state tax laws impose substantial restrictions on the utilization of the net operating loss carryforwards and tax credit carryforwards in the event of an ownership change as defined in Section 382 of the Internal Revenue Code of 1986, as amended. Accordingly, our ability to utilize these carryforwards may be limited as a result of such ownership change. Such a limitation could result in the expiration of carryforwards before they are utilized. The carryforwards are currently subject to a valuation allowance.

Foreign withholding taxes have not been provided for the cumulative undistributed earnings of certain foreign subsidiaries of us as of January 31, 2023 and 2022 due to our intention to permanently reinvest such earnings. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our tax years generally remain open and subject to examination by federal, state, or foreign tax authorities. We are currently

under examination by the Israel Tax Authorities for the 2017 through 2021 tax years. We are not currently under audit in any other tax jurisdictions.

The changes in the gross amount of unrecognized tax benefits consisted of the following (in thousands):

	As of January 31,
	2023		2022		2021
Balance at beginning of year	$	566	$	534	$	358
Gross increases for tax positions of current year	447		32		176
Balance at end of year	$	1,013	$	566	$	534

We recognize interests and penalties related to income tax matters as a component of income tax expense. No accrued interest of penalties have been recorded as of January 31, 2023, 2022, and 2021. We do not anticipate that its total unrecognized tax benefits will significantly change during the next 12 months.