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Income Taxes
 12 Months Ended
Feb. 01, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss before provision for income taxes consisted of the following for the fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023 (in thousands):
Fiscal Year Ended
February 1, 2025February 3, 2024January 28, 2023
United States$(168,662)$(298,189)$(256,905)
Foreign18,248 14,806 13,070 
Loss before provision for income taxes$(150,414)$(283,383)$(243,835)
The components of the provision for income taxes consisted of the following for the fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023 (in thousands):
Fiscal Year Ended
February 1, 2025February 3, 2024January 28, 2023
Current:
U.S. Federal$— $— $— 
State and local201 494 585 
Foreign2,219 1,918 1,007 
Total current tax expense$2,420 $2,412 $1,592 
Deferred:
U.S. federal$— $— $— 
State and local— — — 
Foreign2,073 931 1,995 
Total deferred tax expense2,073 931 1,995 
Total provision for income taxes$4,493 $3,343 $3,587 
The effective income tax rate is lower than the U.S. statutory tax rate primarily due to a valuation allowance on the cumulative U.S. deferred tax assets, stock-based compensation adjustments, and executive compensation adjustments. Reconciliations of the income tax provision at the U.S. federal statutory tax rate to the Company’s effective tax rate are as follows:
Fiscal Year Ended
February 1, 2025February 3, 2024January 28, 2023
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
Changes in income taxes resulting from:
State taxes, net of federal benefit9.5 5.6 3.2 
Foreign income taxed at different rates0.7 0.1 (0.1)
Federal research and development credits10.8 4.3 0.9 
Stock-based compensation37.7 14.0 (1.0)
Tax on foreign earnings— — (0.2)
Permanent differences(0.6)(0.3)(0.4)
Change in valuation allowance(81.9)(45.5)(22.9)
Other(0.2)(0.4)(2.0)
Total tax provision(3.0 %)(1.2 %)(1.5 %)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts 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 are shown below (in thousands):
As of
February 1, 2025February 3, 2024
Deferred tax assets:
Net operating loss carryforwards$545,306 $454,073 
Tax credit carryforwards42,803 27,231 
Operating lease liability19,096 24,784 
Capitalized research and development63,946 47,840 
Accruals and reserves39,032 47,056 
Property and equipment1,363 — 
Total deferred tax assets711,546 600,984 
Valuation allowance(560,745)(455,280)
Deferred tax assets, net of valuation allowance150,801 145,704 
Deferred tax liabilities:
Property and equipment— (992)
Deferred commissions(43,060)(38,944)
Deferred connected device costs(81,896)(78,265)
Operating lease right-of-use assets(15,313)(19,817)
Accruals(15,704)(11,366)
Total deferred tax liabilities(155,973)(149,384)
Net deferred tax liabilities$(5,172)$(3,680)
As required by the 2017 Tax Cuts and Jobs Act, effective January 1, 2022, the Company’s research and development expenditures were capitalized and amortized, which resulted in higher deferred tax assets.
The provisions of Accounting Standards Codification (“ASC”) Topic 740, Accounting for Income Taxes (ASC 740), require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. As of February 1, 2025 and February 3, 2024, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was not more likely than not that the net deferred tax assets were fully realizable for U.S. federal and state tax purposes. Accordingly, the Company established a full valuation allowance against its deferred tax assets for U.S. federal and state tax purposes. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance for U.S. federal and state tax purposes. For foreign jurisdictions, the Company does not have a valuation allowance against its deferred tax assets, after considering both the positive and negative evidence.
During the fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023, the Company’s valuation allowance increased by $105.5 million, $128.7 million, and $55.8 million, respectively.
As of February 1, 2025, the Company had U.S. federal, California, and other state net operating loss (“NOL”) carryforwards of approximately $2,299.0 million, $311.0 million, and $2,648.0 million, respectively.
Of the U.S. federal NOL carryforwards, $52.2 million, if not utilized, will begin to expire in 2036 and $2,247.0 million will carryforward indefinitely. The California and other state NOL carryforwards have begun expiring in 2024.
As of February 1, 2025, the Company’s U.S. federal and California research and development credit carryforwards were $43.3 million and $22.9 million, respectively. These are available to offset future income taxes. The U.S. federal credit carryforwards, if not utilized, will begin to expire in 2036, while the California credit carryforwards have no expiration date.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in the Company’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Ownership changes in the future could result in limitations on the Company’s NOL and tax credit carryforwards.
Uncertain Tax Positions
The Company reviews its tax positions to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any tax benefit can be recorded in the consolidated financial statements. ASC 740 also provides guidance on the recognition, measurement, classification, and interest and penalties related to uncertain tax positions. A reconciliation of the beginning and ending balance of total gross unrecognized tax benefits, excluding accrued net interest and penalties, is as follows (in thousands):
Fiscal Year Ended
February 1, 2025February 3, 2024January 28, 2023
Unrecognized tax benefits, beginning balance$16,602 $9,810 $8,816 
Gross increases for tax positions taken in prior years 527 1,934 — 
Gross decreases for tax positions taken in prior years(2,682)(685)(15)
Gross increases for tax positions taken in current year 6,843 5,543 1,009 
Unrecognized tax benefits, ending balance$21,290 $16,602 $9,810 
The unrecognized tax benefits as of February 1, 2025 and February 3, 2024, if recognized, would not affect the effective income tax rate due to the valuation allowance that currently offsets the deferred tax assets.
The Company recognizes interest and penalties related to income tax positions as a component of income tax expense. The Company had no interest and penalties accrued related to uncertain tax positions as of February 1, 2025 and February 3, 2024. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.
The Company files income tax returns in the United States and in foreign jurisdictions. All periods since inception are subject to examination in most jurisdictions.