Income Taxes |
6 Months Ended |
|---|---|
Jul. 31, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes The Company computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period. During the three months ended July 31, 2025 and 2024, the Company recorded an income tax provision of $11.1 million and $4.5 million, respectively. During the six months ended July 31, 2025 and 2024, the Company recorded an income tax provision of $17.9 million and $7.1 million, respectively.
During the three and six months ended July 31, 2025, the Company’s effective tax rate differed from the U.S. federal statutory tax rate primarily due to the impact of non-deductible items, stock-based compensation and foreign tax rate differential on non-U.S. income. During the three and six months ended July 31, 2025, the Company also recorded discrete income tax expense related to impacts of non-deductible stock-based compensation of $1.5 million and $4.5 million, respectively, and withholding tax of $1.9 million and $3.5 million, respectively. During the three and six months ended July 31, 2024, the Company’s effective tax rate differed from the U.S. federal statutory tax rate primarily due to a full valuation allowance related to the Company’s U.S. deferred tax assets, partially offset by state taxes and the foreign tax rate differential on non-U.S. income.
The Company had a valuation allowance of $0.7 million as of July 31, 2025 and January 31, 2025. The Company monitors the realizability of its deferred tax assets taking into account all relevant factors at each reporting period. As of January 31, 2025, based on the relevant weight of positive and negative evidence, including cumulative taxable income over the past three years, which is objective and verifiable, and consideration of the Company’s expected future taxable earnings, the Company concluded that it is more likely than not that its U.S. federal and state deferred tax assets are realizable. As such, the Company released $87.1 million of its valuation allowance associated with the U.S. federal and state deferred tax assets during the year ended January 31, 2025.
The IRA was signed into law on August 16, 2022. The bill was meant to address the high inflation rate in the U.S. through various climate, energy, healthcare, and other incentives. These incentives are meant to be paid for by the tax provisions included in the IRA, such as a new 15 percent corporate minimum tax, a new one percent excise tax on stock buybacks, additional IRS funding to improve taxpayer compliance, and other items. During both the three and six months ended July 31, 2025, the Company paid $1.9 million in excise taxes associated with the 2024 Share Repurchase Program. As of July 31, 2025, the Company has accrued $1.0 million of excise taxes associated with the 2025 Share Repurchase Program. At this time, none of the IRA tax provisions are expected to have a material impact to the Company’s fiscal year 2026 tax provision. The Company will continue to monitor for updates to the Company’s business along with guidance issued with respect to the IRA.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law in the United States. The OBBBA includes significant changes, such as the permanent extension of certain provisions that were originally enacted in the 2017 Tax Cuts and Jobs Act and were set to expire on December 31, 2025, modifications to certain international tax provisions and the restoration of tax treatment for certain business provisions, including 100% bonus depreciation for certain qualified property, domestic research and experimental cost expensing, and the business interest expense limitation. The new legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We currently are assessing the impact on our condensed consolidated financial statements, as well as our annual estimated effective tax rate. However, we do not expect the OBBBA to have a material impact.
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