Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Jan. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income TaxesThe domestic and foreign component of the loss before provision for income taxes was as follows (in thousands):
Year Ended January 31,
2022 2021 2020
Domestic $ (123,956) $ (39,957) $ (43,461)
Foreign 19,402  5,764  7,005 
Total $ (104,554) $ (34,193) $ (36,456)
The provision for income taxes consisted of the following (in thousands):
Year Ended January 31,
2022 2021 2020
Current tax provision
Federal $ —  $ —  $ (11)
State 67  102  38 
Foreign 6,987  3,785  3,330
7,054  3,887  3,357 
Deferred tax expense (benefit)
Federal $ 88  $ 85  $ 76 
State 92  99  (98)
Foreign (318) (294) (10)
(138) (110) (32)
Total provision for income taxes 6,916  3,777  3,325 

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate was as follows:
Year Ended January 31,
2022 2021 2020
U.S. federal statutory rate 21.0  % 21.0  % 21.0  %
Effect of:
State taxes, net of U.S. federal benefit 2.8  0.2  3.1 
Foreign taxes in excess of the U.S. rate differential (1.8) (1.1) (3.2)
Non-deductible expenses (8.7) (23.0) (6.5)
Changes in valuation allowance (23.9) (16.1) (22.3)
Excess tax benefits related to shared based compensation 4.8  10.9  2.2 
Other (0.8) (3.0) (3.4)
(6.6) % (11.1) % (9.1) %
Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities were as follows (in thousands):
January 31,
2022 2021
Deferred tax assets:
Net operating loss carryforward $ 105,753  $ 75,304 
Accrued expenses 2,003  1,643 
Accrued commissions 718  464 
Depreciation and amortization 613  787 
Allowance for doubtful accounts 656  601 
Deferred revenue 4,821  7,430 
Stock-based compensation 7,068  3,932 
Other 686  540 
Total deferred tax assets $ 122,318  $ 90,701 
Less valuation allowance (98,093) (73,299)
Deferred tax assets, net of valuation allowance $ 24,225  $ 17,402 
Deferred tax liabilities
  Depreciation and amortization (3,566) (2,496)
Capitalized commission costs (20,182) (14,801)
Other (287) (20)
Total deferred tax liabilities $ (24,035) $ (17,317)
Net deferred tax assets (liabilities) $ 190  $ 85 
The income tax disclosures presented above as of January 31, 2021 and for the years ended January 31, 2021 and 2020 have been revised in connection with the immaterial corrections disclosed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies.
At January 31, 2022, for U.S. federal income tax purposes, the Company had net operating loss carryforwards of approximately $395.4 million, which expire in fiscal 2032 through fiscal 2038. The U.S. federal net operating losses generated after December 31, 2017 do not expire and may be carried forward indefinitely. For U.S. states income tax purposes, the Company had net operating loss carryforwards of approximately $287.1 million, which expire in various years beginning from fiscal 2022 through fiscal 2042. For foreign income tax purposes, the Company had net operating loss carryforwards of approximately $14.7 million which expire beginning fiscal 2024.
Utilization of the Company’s net operating loss carryforwards may be subject to an annual limitation as a result of an ownership change, as defined under the provisions of Section 382 of the Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization. Utilization of the Company’s foreign NOL carryforwards in the future will be dependent upon the local tax law and regulation.
The Company had a valuation allowance of $98.1 million and $73.3 million as of January 31, 2022 and 2021, respectively. The Company regularly evaluates the need for a valuation allowance against its deferred tax assets by considering both positive and negative evidence related to whether it is more likely than not that our deferred tax assets will be realized. Based on the weight of the available evidence, which includes the Company’s historical operating losses, and lack of taxable income, the Company provided a full valuation allowance against the deferred tax assets for the U.S. and certain international entities.

The Company has not recorded deferred income taxes and withholding taxes with respect to the undistributed earnings of its foreign subsidiaries as such earnings are determined to be reinvested indefinitely. If those earnings were repatriated, in the form of dividends or otherwise, the Company could be subject to U.S. income taxes and withholding taxes to the various foreign countries. As of January 31, 2022, the Company had $48.9 million of earnings indefinitely reinvested outside of the U.S. Due to complexities in the laws of the foreign jurisdictions and the assumptions that would have to be made, it is not practicable to estimate the amount of tax associated with such unremitted earnings.
Unrecognized Tax Benefits and Other Considerations
The Company records liabilities related to its uncertain tax positions. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company records interest and penalties related to unrecognized tax benefits within the Company’s provision for income taxes.

A reconciliation of the beginning and ending balance of total gross unrecognized tax benefits for the year ended January 31, 2022 (in thousands):

Year Ended January 31,
2022
Balance at beginning of period $ 568 
Tax positions taken during a prior year:
Gross increases 1,229 
Gross decreases (605)
Tax positions taken during the current year:
Gross increases 347 
Balance at end of period $ 1,539 

As of January 31, 2021, the Company had an immaterial balance accrued related to unrecognized tax benefits and did not record additional amounts during the year ended January 31, 2021. The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. In addition, the Company accrued immaterial amounts related to penalties and interest during the years ended January 31, 2022.

It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease to certain unrecognized tax benefits due to tax examination changes, settlement activities, expirations of statute of limitations, or other similar activities. Nonetheless, the Company anticipates insignificant changes to unrecognized tax benefits over the next 12 months.

The Company is subject to taxation in multiple jurisdictions in the United States and outside of the United States. The Company currently considers U.S. federal, Brazil, France, India, Japan, and the United Kingdom to be major tax jurisdictions. Tax years 2017 and forward remain open for examination for U.S. federal tax purposes and tax years 2018 and forward remain open for examination for the Company's more significant state jurisdictions. To the extent utilized in future years’ tax returns, net operating loss carryforwards from tax years 2012 and onward will remain subject to examination until the respective tax year is closed. Generally, tax authorities outside of the United States may examine the Company’s tax returns five years from the date an income tax return is filed.