v3.22.4
Income Taxes
 12 Months Ended
Jan. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s geographical breakdown of its loss before provision for income taxes for the fiscal years ended January 31, 2023, January 31, 2022, and January 31, 2021 is as follows (in thousands):
Year Ended January 31,
202320222021
Domestic$(195,042)$(179,334)$(94,713)
International35,159 19,311 6,844 
Loss before provision for income taxes$(159,883)$(160,023)$(87,869)
The components of the provision for income taxes during the fiscal years ended January 31, 2023, January 31, 2022, and January 31, 2021 are as follows (in thousands):
Year Ended January 31,
202320222021
Current
Federal$— $— $— 
State855 611 401 
Foreign20,241 85,700 5,811 
Total current21,096 86,311 6,212 
Deferred
Federal135 (363)(136)
State89 (63)(317)
Foreign1,082 (13,530)(999)
Total deferred1,306 (13,956)(1,452)
Provision for income taxes$22,402 $72,355 $4,760 
The following table provides a reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes during the fiscal years ended January 31, 2023, January 31, 2022, and January 31, 2021 (in thousands):
As of January 31,
202320222021
Provision for income taxes at statutory rate$(33,777)$(33,605)$(18,453)
State income taxes, net of federal benefits944 673 — 
Foreign tax rate differential
11,003 574 1,994 
Research and other credits(19,465)(19,113)(9,373)
Stock-based compensation(47,335)(145,964)(140,489)
Non-deductible expenses2,800 2,783 2,212 
Change in valuation allowance102,892 210,680 168,869 
Tax impact of restructuring5,340 57,236 — 
Other — (909)— 
Provision for income taxes$22,402 $72,355 $4,760 
The Company recognized income tax expense of $22.4 million, $72.4 million, and $4.8 million for the fiscal years January 31, 2023, January 31, 2022 and January 31, 2021, respectively. The tax expense for the fiscal year ended January 31, 2021 was primarily attributable to pre-tax foreign earnings and withholding taxes related to customer payments in certain foreign jurisdictions in which the Company conducts business. The tax expense for the fiscal years ended January 31, 2023 and January 31, 2022 was primarily attributable to pre-tax foreign earnings, withholding taxes related to customer payments in certain foreign jurisdictions and intercompany sales of intellectual property from acquisitions, whereby the Company transferred acquired intellectual property from the respective foreign subsidiary to the U.S. Although the transfers of the intellectual property between consolidated entities did not result in any gain in the consolidated statements of operations, the Company generated a taxable gain in the respective foreign jurisdiction, resulting in an additional tax expense of $4.7 million and $57.2 million for the fiscal years ended January 31, 2023 and January 31, 2022, respectively.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s deferred tax assets and liabilities as of January 31, 2023 and January 31, 2022 are as follows (in thousands):
As of January 31,
20232022
Deferred tax assets
Net operating loss carryforwards$441,352 $428,238 
Research and other credit carryforwards75,712 56,539 
Intangible assets62,650 61,008 
Stock-based compensation44,861 33,202 
Deferred revenue109,919 34,425 
Accrued expenses17,890 12,550 
Operating lease liabilities13,013 10,144 
Capitalized research and development286,124 154,625 
Other, net— 4,514 
Gross deferred assets1,051,521 795,245 
Less: Valuation allowance(910,070)(770,861)
Total deferred tax assets141,451 24,384 
Deferred tax liabilities
Property and equipment, net(24,096)(8,769)
Capitalized commissions(99,397)(1,632)
Operating right-of-use assets(12,285)(9,256)
Other, net(1,220)— 
Total deferred tax liabilities(136,998)(19,657)
Net deferred tax assets$4,453 $4,727 
At each reporting date, the Company has established a valuation allowance against its U.S. federal and state and U.K.net deferred tax assets due to the uncertainty surrounding the realization of those assets. The Company periodically evaluates the recoverability of the deferred tax assets and, when it is determined to be more-likely-than-not that the deferred tax assets are realizable, the valuation allowance is reduced. During the fiscal years ended January 31, 2023, January 31, 2022, and January 31, 2021, the valuation allowance increased by $139.2 million, $357.0 million, and $206.2 million, respectively. The increases in the valuation allowance during the fiscal years ended January 31, 2023 and January 31, 2022 were primarily driven by losses generated in the U.S. and U.K. As of January 31, 2023, January 31, 2022, and January 31, 2021 the valuation allowance for deferred taxes was $910.1 million, $770.9 million, and $413.8 million, respectively.
As of January 31, 2023, the Company had aggregate federal and California net operating loss carryforwards of $1.6 billion and $248.2 million, respectively, which may be available to offset future taxable income for income tax purposes. The federal and California net operating loss carryforwards begin to expire in fiscal 2031 through fiscal 2043. As of January 31, 2023, net operating loss carryforwards for other states totaled $1.0 billion, which begin to expire in fiscal 2024 through fiscal 2043. As of January 31, 2023, net operating loss carryforwards for the U.K. totaled $80.9 million, which are carried forward indefinitely.
As of January 31, 2023, the Company had federal and California research and development (“R&D”) credit carryforwards of $87.4 million and $18.8 million, respectively. The federal R&D credit carryforwards will begin to expire in fiscal 2035 though fiscal 2043. The California R&D credits are carried forward indefinitely.
The Internal Revenue Code imposes limitations on a corporation’s ability to utilize net operating loss (“NOLs”) and credit carryovers if it experiences an ownership change as defined in Section 382. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. If an ownership change has occurred, or were to occur, utilization of the Company’s NOLs and credit carryovers could be restricted. The Company’s net operating losses and credit carryovers are not currently subject to a limitation due to an ownership change.
Total gross unrecognized tax benefits as of January 31, 2023, January 31, 2022, and January 31, 2021 were $36.9 million, $26.3 million, and $24.4 million, respectively. As of January 31, 2023, the Company had $4.2 million of unrecognized tax benefits, which, if recognized, would affect the Company’s effective tax rate due to the full valuation allowance. The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as part of the income tax provision in the consolidated statements of operations. The Company had incurred an insignificant amount of interest and penalties related to unrecognized tax benefits as of January 31, 2023 and January 31, 2022, and did not accrue interest and penalties in prior periods. During the fiscal year ended January 31, 2023, January 31, 2022, and January 31, 2021 the net increase in uncertain tax benefits was a result of research and development credits. The potential change in unrecognized tax benefits during the next 12 months is not expected to be material.
The following is a rollforward of the total gross unrecognized tax benefits for the fiscal years ended January 31, 2023, January 31, 2022, and January 31, 2021 (in thousands):
Balance as of February 1, 2020$5,469 
Increases in prior period tax positions
6,926 
Increases in current period tax positions12,052 
Balance as of January 31, 202124,447 
Increases in prior period tax positions186 
Decreases in prior period tax positions(9,772)
Increases in current period tax positions11,463 
Balance as of January 31, 202226,324 
Decreases in prior period tax positions(2,122)
Increases in current period tax positions12,699 
Balance as of January 31, 2023$36,901 
The Company files income tax returns in the U.S. federal, foreign, and various state jurisdictions. Tax years 2011 and onwards remain subject to examination by U.S. taxing authorities due to the Company’s net operating losses and R&D credit carryforwards.
The Company does not provide for federal and state income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested offshore indefinitely. If the Company repatriated these earnings, the tax impact of future distributions of foreign earnings would generally be limited to withholding tax from foreign jurisdictions, and the resulting income tax liability would be insignificant.