Income Taxes

12 Months Ended

Jan. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

14 Income Taxes

The U.S. and foreign components of loss before income taxes are as follows for the periods presented (in thousands):

	Year Ended January 31,
	2025		2024		2023
U.S.	$	(136,507)	$	(168,587)	$	(273,467)
Foreign	58,407		92,772		(44,094)
Loss before income taxes	$	(78,100)	$	(75,815)	$	(317,561)

The components of the provision for income taxes are as follows for the periods presented (in thousands):

	Year Ended January 31,
	2025		2024		2023
Current expense (benefit)
Federal	$	—	$	(106)	$	213
State	586		(166)		493
Foreign	14,802		13,786		9,224
Total current expense	15,388		13,514		9,930
Deferred expense (benefit)
Federal	593		—		—
State	—		—		—
Foreign	(20,387)		554		861
Total deferred (benefit) expense	$	(19,794)	$	554	$	861
Total (benefit from) provision for income taxes	$	(4,406)	$	14,068	$	10,791

The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for the periods presented:

	Year Ended January 31,
	2025		2024		2023
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Foreign taxes	(11.6)		(2.0)		(2.2)
Non-deductible expenses	(9.5)		(17.9)		(2.1)
Stock-based compensation	(25.0)		(4.6)		(10.8)
Valuation allowance	62.2		(5.7)		(12.3)
Research and development credits	14.7		18.9		3.3
Cross border tax law	(44.6)		(27.4)		—
Other, net	(1.6)		(0.9)		(0.3)
Effective income tax rate	5.6	%	(18.6)	%	(3.4)	%

Significant components of DTAs and DTLs are as follows as of the periods presented (in thousands):

	As of January 31,
	2025		2024
Deferred tax assets:
Net operating loss carryforwards	$	317,489	$	344,067
Accruals and reserves	12,643		15,823
Stock-based compensation	6,512		11,888
Deferred revenue	29,376		25,942
Research and development	90,110		103,263
Depreciation and amortization	1,459		587
Lease liabilities	8,255		11,563
Other	6,428		5,602
Total deferred tax assets, gross	472,272		518,735
Less: valuation allowance	(406,251)		(470,040)
Total deferred tax assets, net of valuation allowance	66,021		48,695
Deferred tax liabilities:
Intangible assets	(1,431)		(2,409)
Foreign exchange	(34)		(37)
Right-of-use assets	(5,728)		(8,957)
Commissions	(30,871)		(32,747)
Other	(3,791)		—
Total deferred tax liabilities	(41,855)		(44,150)
Net deferred tax assets	$	24,166	$	4,545
Net deferred tax assets	$	27,963	$	4,678
Net deferred tax liabilities (included in other liabilities, non-current)	(3,797)		(133)
Net deferred tax assets	$	24,166	$	4,545

The table below details our DTA valuation allowances and the changes therein for the periods presented (in thousands):

	Beginning Balance		Additions During the Period		Reductions During the Period		Ending Balance
Year ended January 31, 2025	$	470,040	$	17,314	$	(81,103)	$	406,251
Year ended January 31, 2024	$	476,589	$	5,474	$	(12,023)	$	470,040

For fiscal year 2025, we recorded a net decrease in valuation allowance of $63.8 million, which consists of a valuation allowance release of $24.7 million related to our U.K. entity, based on our reassessment of the amount of the U.K. DTAs that are more likely than not to be realized, and a net decrease of $39.1 million related to a decrease in net DTAs associated with our U.S., Romania, and U.K. entities. For fiscal year 2024, we recorded a net decrease in valuation allowance of $6.5 million, driven by a decrease in Romania and U.K. net DTAs.

The realization of tax benefits of net DTAs is dependent upon future levels of taxable income of an appropriate character in the periods the items are expected to be deductible or taxable. As of January 31, 2025, based on the available positive and negative evidence, including the amount of taxable income in the U.K. in recent years and our expectations of future profits in the U.K., we now believe it is more likely than not that the U.K. DTA is realizable. Therefore, during fiscal year 2025, we released the $24.7 million valuation allowance associated with the U.K. DTA. We continue to maintain full valuation allowances against our U.S. and Romania DTAs as of January 31, 2025 because we believe based on our current evaluations that it is more likely than not that these DTAs will not be realized. We intend to maintain each of these full valuation allowances until sufficient positive evidence exists to support a reversal of, or decrease in, each of the respective valuation allowances.

However, we may release our U.S. or Romania valuation allowances in future periods if objective negative evidence of cumulative losses is no longer present and positive evidence, such as projection of future growth, supports the realization of such DTAs. Release of all or a portion of these valuation allowances would result in a decrease in the provision for income taxes in the period of the release.

As of January 31, 2025, we had U.S. federal NOLs of $645.8 million available to offset future taxable income, all of which can be carried forward indefinitely. As of January 31, 2024 we had U.S. federal NOLs of $827.4 million, all of which could be carried forward indefinitely.

As of January 31, 2025 and 2024, we had state NOLs of $834.6 million and $824.7 million, respectively, which begin expiring in 2026.

As of January 31, 2025 and 2024, we had Romania NOLs of $658.2 million and $549.9 million, respectively, which begin expiring in 2026. As of January 31, 2025 and 2024, we had Japan NOLs of $1.8 million and $6.3 million, respectively, which begin expiring in 2027. Additionally, as of January 31, 2025 and 2024, we had U.K. NOLs of $101.7 million and $118.3 million, respectively, which may be carried forward indefinitely.

Pursuant to Section 382 of the IRC, annual use of our U.S. NOLs may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. We determined that two such ownership changes have occurred. The first resulted in an annual limitation, independent of net unrealized built-in gains, of $0.1 million for our NOLs as of April 24, 2017 but did not result in permanent disallowance of any NOLs. The second resulted in an annual limitation, independent of net unrealized built-in gains, of $29.0 million for our NOLs as of July 9, 2020 but did not result in permanent disallowance of any NOLs.

As of January 31, 2025, we have recorded a deferred tax liability of $3.8 million associated with the undistributed earnings of our foreign subsidiaries that we no longer intend to indefinitely reinvest.

The table below details our gross unrecognized tax benefits (excluding penalties and interest) and the changes therein for the periods presented (in thousands):

	Year Ended January 31,
	2025		2024
Beginning unrecognized tax benefits	$	504	$	504
Additions for tax positions related to prior years	59,671		—
Ending unrecognized tax benefits	$	60,175	$	504

As of January 31, 2025, we had gross unrecognized tax benefits totaling $60.9 million (inclusive of penalties and interest) related to income taxes, of which $1.6 million would impact the effective tax rate if recognized. Of this amount, the total liability pertaining to uncertain tax positions was $0.9 million, excluding interest and penalties. The remainder of the unrecognized tax benefits, which primarily relate to the Romanian corporate income tax audit by ANAF and bilateral transfer pricing negotiations between the U.S. and Romania (described in further detail below), would not affect the effective tax rate because the unrecognized tax benefit is recorded as a reduction in our gross deferred assets, offset by a corresponding reduction in our valuation allowance. As of January 31, 2024, we had gross unrecognized tax benefits of $2.3 million (inclusive of penalties and interest) related to income taxes, which would impact the effective tax rate if recognized. Of this amount, the total liability pertaining to uncertain tax positions was $0.5 million, excluding interest and penalties. Our policy is to recognize interest and penalties associated with tax matters as part of the income tax provision. During fiscal year 2025, the penalties and interest recorded related to uncertain tax positions was not material.

Our tax positions are subject to income tax audits in multiple tax jurisdictions globally. Our estimate of the potential outcome of any uncertain tax position is subject to management's assessment of the relevant risks, facts, and circumstances existing at that time. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. However, our future results may include adjustments to estimates in the period the audits are settled, which may impact our effective tax rate. Currently, our India subsidiary is appealing the corporate income tax assessment of $2.1 million for the audit period of April 2019 through March 2021. It also has an open corporate income tax audit for the period from January 2018 through January 2022. During fiscal year 2025, the Romanian ANAF completed a corporate income tax audit for the period from January 2018 through January 2022. Certain deductions have been disallowed, resulting in a proposed reduction of NOLs of approximately $66.7 million. We are appealing $64.3 million of the disallowance through litigation, $25.4 million of which we believe more likely than not will not be sustained. As a result, as of January 31, 2025, the Romania DTA and the corresponding valuation allowance has been reduced by $25.4 million.

In addition, we have engaged in two bilateral transfer pricing negotiations for our transfer pricing model, one between the U.S and Romania, and one between Japan and Romania. These negotiations are still underway, and the authorities are in the process of determining the cost sharing allocations between the respective countries, and the ultimate outcomes remain uncertain. However, after evaluating recent developments in the transfer pricing negotiation between the U.S. and Romania, in anticipation of the agreement, during fiscal year 2025, we recorded a $33.8 million decrease in the U.S. DTA and the corresponding valuation allowance, representing the unrecognized tax benefit related to the U.S.-Romania bilateral advance pricing agreement. We also recorded a $16.0 million increase in the Romania DTA and its related valuation allowance. These amounts represent our best estimate of the tax expense associated with the proposed transfer pricing arrangements and their related effects.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various international jurisdictions. Tax years 2021 and forward generally remain open for examination for federal and state tax purposes. Tax years 2018 and forward generally remain open for examination for foreign tax purposes. To the extent utilized in future years’ tax returns, NOLs at January 31, 2025 and 2024 will remain subject to examination until the respective tax year is closed.

On December 20, 2021, the OECD published the Pillar Two Model Rules defining the global minimum tax, which calls for 15% global minimum tax for multinational enterprises with an annual revenue above €750.0 million. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. As of January 31, 2025, various countries, including EU, U.K., Japan, and Australia, have implemented the Pillar Two rules to varying degrees. We assessed and concluded that

the Pillar Two Model Rules do not have a significant impact on our consolidated financial statements for fiscal year 2025. We will continue to monitor developments and evaluate potential impact on future periods.