v3.24.0.1
Income Taxes
 12 Months Ended
Jan. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s geographical breakdown of its income (loss) before provision for income taxes for the fiscal years ended January 31, 2024, January 31, 2023, and January 31, 2022 is as follows (in thousands):
Year Ended January 31,
202420232022
Domestic$99,241 $(195,042)$(179,334)
International23,576 35,159 19,311 
Income (loss) before provision for income taxes$122,817 $(159,883)$(160,023)
The components of the provision for income taxes during the fiscal years ended January 31, 2024, January 31, 2023, and January 31, 2022 are as follows (in thousands):
Year Ended January 31,
202420232022
Current
Federal$272 $— $— 
State4,462 855 611 
Foreign30,885 20,241 85,700 
Total current35,619 21,096 86,311 
Deferred
Federal(307)135 (363)
State(343)89 (63)
Foreign(2,737)1,082 (13,530)
Total deferred(3,387)1,306 (13,956)
Provision for income taxes$32,232 $22,402 $72,355 
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, 2024, January 31, 2023, and January 31, 2022 (in thousands):
As of January 31,
202420232022
Provision for income taxes at statutory rate$25,527 $(33,777)$(33,605)
State income taxes, net of federal benefits4,118 944 673 
Foreign tax rate differential
22,425 11,003 574 
Research and other credits(21,182)(19,465)(19,113)
Stock-based compensation(31,852)(47,335)(145,964)
Non-deductible expenses4,604 2,800 2,783 
Change in valuation allowance28,810 102,892 210,680 
Tax impact of restructuring— 5,340 57,236 
Other (218)— (909)
Provision for income taxes$32,232 $22,402 $72,355 
The Company recognized income tax expense of $32.2 million, $22.4 million, and $72.4 million for the fiscal years January 31, 2024, January 31, 2023 and January 31, 2022, respectively. The tax expense for the fiscal year ended January 31, 2024 was primarily attributable to pre-tax 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 and withholding taxes related to customer payments in certain foreign jurisdictions and intercompany sales of intellectual property from acquisitions. 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, 2024 and January 31, 2023 are as follows (in thousands):
As of January 31,
20242023
Deferred tax assets
Net operating loss carryforwards$420,803 $441,352 
Research and other credit carryforwards100,002 75,712 
Intangible assets81,551 62,650 
Stock-based compensation33,885 44,861 
Deferred revenue169,777 109,919 
Accrued expenses23,956 17,890 
Operating lease liabilities20,613 13,013 
Capitalized research and development320,708 286,124 
Gross deferred assets1,171,295 1,051,521 
Less: Valuation allowance(957,710)(910,070)
Total deferred tax assets213,585 141,451 
Deferred tax liabilities
Property and equipment, net(51,335)(24,096)
Capitalized commissions(128,302)(99,397)
Intangible assets(6,489)— 
Operating right-of-use assets(19,956)(12,285)
Other, net(277)(1,220)
Total deferred tax liabilities(206,359)(136,998)
Net deferred tax assets$7,226 $4,453 
The Company maintains a full valuation allowance on U.S. federal and state and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits, which the Company has determined are not realizable on a more-likely-than-not basis. The Company regularly evaluates the need for a valuation allowance. Due to recent profitability, a material reversal of the Company’s valuation allowance in U.S. jurisdictions in the foreseeable future is reasonably possible. During the fiscal years ended January 31, 2024, January 31, 2023, and January 31, 2022, the valuation allowance increased by $47.6 million, $139.2 million, and $357.0 million, respectively. The increases in the valuation allowance during the fiscal years ended January 31, 2024 and January 31, 2023 were primarily driven by U.S. operations. As of January 31, 2024, January 31, 2023, and January 31, 2022 the valuation allowance for deferred taxes was $957.7 million, $910.1 million, and $770.9 million, respectively.
As of January 31, 2024, the Company had aggregate federal and California net operating loss carryforwards of $1.5 billion and $243.9 million, respectively, which may be available to offset future taxable income for income tax purposes. The federal net operating losses are carried forward indefinitely, and California net operating loss carryforwards begin to expire in 2032 through 2043. As of January 31, 2024, net operating loss carryforwards for other states totaled $0.8 billion, which begin to expire in fiscal 2025 through fiscal 2043. As of January 31, 2024, net operating loss carryforwards for the U.K. totaled $78.0 million and Israel totaled $51.5 million, which are carried forward indefinitely.
As of January 31, 2024, the Company had federal and California research and development (“R&D”) credit carryforwards of $113.9 million and $27.4 million, respectively. The federal R&D credit carryforwards will begin to expire in fiscal 2036 though fiscal 2044. 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, 2024, January 31, 2023, and January 31, 2022 were $58.9 million, $36.9 million, and $26.3 million, respectively. As of January 31, 2024, the Company had $12.7 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. Cumulatively, the Company had incurred $1.4 million of interest and penalties related to unrecognized tax benefits as of January 31, 2024, and an insignificant amount of interest and penalties related to unrecognized tax benefits as of January 31, 2023, and January 31, 2022. During the fiscal year ended January 31, 2024, January 31, 2023, and January 31, 2022 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, 2024, January 31, 2023, and January 31, 2022 (in thousands):
Balance as of February 1, 2021$24,447 
Increases in prior period tax positions
186 
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, 202336,901 
Increases in prior period tax positions4,757 
Decreases in prior period tax positions(1,321)
Increases in current period tax positions18,538 
Balance as of January 31, 2024$58,875 
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 taxing authorities.
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.