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Income Taxes
9 Months Ended
Oct. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
For the three and nine months ended October 31, 2017, the Company recorded a tax benefit of $0.9 million and $0.5 million on a pretax loss of $34.7 million and $90.1 million, respectively. The effective tax rate for the three and nine months ended October 31, 2017 was 2.7% and 0.5%, respectively. The effective tax rates differ from the statutory rates primarily as a result of tax benefits from stock-based compensation in the United Kingdom and providing no benefit on pretax losses incurred in the United States, as the Company has determined that the benefit of the losses is not more likely than not to be realized.
For the three and nine months ended October 31, 2016, the Company recorded a tax provision of $0.1 million and $0.3 million on a pretax loss of $21.8 million and $65.0 million, respectively. The effective tax rate for the three and nine months ended October 31, 2016 was (0.4)%. The effective tax rates differ from the statutory rates primarily as a result of providing no benefit on pretax losses incurred in the United States, as the Company has determined that the benefit of the losses is not more likely than not to be realized.
The Company adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718), effective February 1, 2017. Upon adoption, the Company recorded a retrospective increase of $0.3 million in gross U.S. deferred tax assets for previously unrecognized excess tax benefits that existed as of January 31, 2017, and a corresponding increase of $0.3 million in valuation allowance against these deferred tax assets, as the Company’s U.S. deferred tax assets are subject to a full valuation allowance. As such, the net impact to the Company’s retained earnings was zero. The adopted guidance requires all of the tax effects related to share-based payments to be recorded through the income statement. The Company’s effective tax rate reflected $1.2 million of tax benefit from stock-based compensation as a result of exercised options in the current period. The Company’s income tax rate may fluctuate based upon its stock price and the amount of stock options exercised and equity awards vested in a particular quarter.