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Income Taxes | 12 Months Ended
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Jan. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Income Taxes Loss before income taxes consisted of the following for the periods indicated:
|  | Year Ended January 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |
U.S. operations |  | $ | (18,968 | ) |  | $ | (5,842 | ) |  | $ | 8 |
Non-U.S. operations |  |  | (51,970 | ) |  |  | (22,799 | ) |  |  | (57,311 | )
Loss before income taxes |  | $ | (70,938 | ) |  | $ | (28,641 | ) |  | $ | (57,303 | )
Income tax provision (benefit) consisted of the following for the periods indicated:
|  | Year Ended January 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |
Current: |  |  |  |  |  |  |  |  |
U.S. federal tax |  | $ | (3,525 | ) |  | $ | 907 |  |  | $ | 1,705 |
U.S. state taxes |  |  | 175 |  |  |  | — |  |  |  | 256 |
Non-U.S. foreign taxes |  |  | 2,395 |  |  |  | 1,778 |  |  |  | 1,019 |
|  |  | (955 | ) |  |  | 2,685 |  |  |  | 2,980 |
Deferred: |  |  |  |  |  |  |  |  |
U.S. federal tax |  |  | (4,231 | ) |  |  | (4,819 | ) |  |  | (432 | )
U.S. state taxes |  |  | — |  |  |  | (14 | ) |  |  | — |
Non-U.S. foreign taxes |  |  | (366 | ) |  |  | (82 | ) |  |  | (65 | )
|  |  | (4,597 | ) |  |  | (4,915 | ) |  |  | (497 | )
Provision (benefit) for income taxes |  | $ | (5,552 | ) |  | $ | (2,230 | ) |  | $ | 2,483 |
The Company consists of a Cayman Islands parent company with various foreign and U.S. subsidiaries. Effective December 31, 2019, the Company has structured its activities to comply with the International Tax Co-Operation (Economic Substance) Law, 2018 in the Cayman Islands. As part of the new structure, the Company is the general partner of a Canadian limited partnership, the ultimate beneficial owner, and is allocated all of the earnings of the partnership. The primary jurisdiction where our foreign earnings are derived is the Cayman Islands, where the Company is domiciled. Under the current laws of the Cayman Islands, the Company is not subject to tax on its income. For purposes of the reconciliation between the provision (benefit) for income taxes at the statutory rate and the effective tax rate, a notional U.S. 21% rate is applied to pretax income (loss) as a result of the following for the periods indicated, respectively:
|  | Year Ended January 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |
Provision at U.S. notional statutory rate |  | $ | (14,897 | ) |  | $ | (6,015 | ) |  | $ | (12,034 | )
U.S. state taxes |  |  | 114 |  |  |  | (11 | ) |  |  | 212 |
Non-U.S. foreign tax differential |  |  | 12,943 |  |  |  | 6,483 |  |  |  | 12,989 |
Stock-based compensation |  |  | 10,004 |  |  |  | 1,900 |  |  |  | 4,943 |
U.S. R&D credit |  |  | (5,045 | ) |  |  | (5,886 | ) |  |  | (3,928 | )
Valuation allowance |  |  | 2,124 |  |  |  | 765 |  |  |  | — |
FIN48 interest |  |  | (739 | ) |  |  | 311 |  |  |  | — |
Uncertain tax position release |  |  | (10,188 | ) |  |  | — |  |  |  | — |
Other |  |  | 132 |  |  |  | 223 |  |  |  | 301 |
Provision (benefit) for income taxes |  | $ | (5,552 | ) |  | $ | (2,230 | ) |  | $ | 2,483 |
Temporary differences that gave rise to significant portions of the Company’s deferred tax assets and liabilities at January 31, 2023 and 2022 were as follows:
|  | As of January 31, |
|  | 2023 |  |  | 2022 |
|  | (in thousands) |
Deferred tax assets: |  |  |  |  |  |
Federal and state credits |  | $ | 40,134 |  |  | $ | 33,485 |
Net operating losses |  |  | 6,659 |  |  |  | 7,466 |
Expenses not currently deductible |  |  | 3,164 |  |  |  | 1,294 |
Operating lease liabilities |  |  | 1,582 |  |  |  | 2,096 |
Stock-based compensation |  |  | 3,678 |  |  |  | 3,632 |
Foreign deferred |  |  | 262 |  |  |  | 191 |
Gross deferred tax assets |  |  | 55,479 |  |  |  | 48,164 |
Valuation allowance |  |  | (28,596 | ) |  |  | (24,083 | )
Total deferred tax assets |  | $ | 26,883 |  |  | $ | 24,081 |
Deferred tax liabilities |  |  |  |  |  |
Intangible assets |  |  | (6,782 | ) |  |  | (8,150 | )
Property and equipment |  |  | (617 | ) |  |  | (386 | )
Operating lease assets |  |  | (1,452 | ) |  |  | (1,971 | )
Net deferred tax assets |  | $ | 18,032 |  |  | $ | 13,574 |
Tax valuation allowance for the periods indicated below were as follows:
|  |  |  |  |  |  |  |  |  |  | Deductions |  |  |  |
|  |  |  |  |  |  |  | Additions |  |  | Charged to |  |  |  |
|  | Balance at |  |  | Additional |  |  | Charged to |  |  | Expenses |  |  | Balance at |
|  | Beginning of |  |  | Charged to |  |  | Other |  |  | or Other |  |  | End of |
|  | Period |  |  | Expenses |  |  | Account |  |  | Accounts |  |  | Period |
|  | (in thousands) |
Tax Valuation Allowance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Year ended January 31, 2023 |  | $ | 24,083 |  |  |  | 4,513 |  |  |  | — |  |  |  | — |  |  | $ | 28,596 |
Year ended January 31, 2022 |  | $ | 17,962 |  |  |  | 4,874 |  |  |  | 1,247 |  |  |  | — |  |  | $ | 24,083 |
Year ended January 31, 2021 |  | $ | 14,670 |  |  |  | 3,292 |  |  |  | — |  |  |  | — |  |  | $ | 17,962 |
The Company conducts its business in several countries and regions and is subject to taxation in those jurisdictions. The Company is incorporated in the Cayman Islands with foreign subsidiaries in the U.S., China, Taiwan, Italy and other foreign countries and regions. As such, the Company’s worldwide operating income is subject to varying tax rates and its effective tax rate is highly dependent upon the geographic distribution of its earnings or losses and the tax laws and regulations in each geographical region. Consequently, the Company has experienced lower effective tax rates as a substantial amount of its operations are conducted in lower-tax jurisdictions. If the Company’s operational structure was to change in such a manner that would increase the amount of operating income subject to taxation in higher-tax jurisdictions, or if the Company was to commence operations in jurisdictions assessing relatively higher tax rates, its effective tax rate could fluctuate significantly on a quarterly basis and/or be adversely affected. Dividend distributions received from the Company’s U.S. subsidiary and certain other foreign subsidiaries may be subject to local country withholding taxes when, and if, distributed. Deferred tax liabilities have not been recorded on unremitted earnings of certain subsidiaries because management’s intent is to indefinitely reinvest any undistributed earnings in those subsidiaries. If dividend distributions from those subsidiaries were to occur, the liability as of January 31, 2023 would be $15.6 million. Cumulative undistributed earnings of foreign subsidiaries for which no deferred taxes have been provided approximated $107.9 million at January 31, 2023. As of January 31, 2023 and 2022, the Company had deferred tax assets (net of deferred tax liabilities) before valuation allowance, of $46.6 million and $37.7 million, respectively. The Company assesses whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” standard. The Company has Federal and California net operating losses of $31.4 million and $1.0 million, respectively, as of January 31, 2023. The Federal net operating loss carryforwards begin to expire in fiscal year 2037. The California net operating loss carryforwards begin to expire in fiscal year 2040, if not utilized. For financial statement purposes these carry forwards are offset by uncertain tax positions. The Company also has Federal and California state research and development credit carryforwards of approximately $27.5 million and $37.5 million, respectively, at January 31, 2023. The Federal credits begin to expire in fiscal year 2037. The California credits can be carried forward indefinitely. The Company reports its U.S. state deferred tax assets and related valuation allowance, net of the U.S federal tax rate of 21%. As of January 31, 2023, the Company has recorded a valuation allowance of $24.5 million against all of its U.S. state deferred tax assets due to uncertainty regarding the future utilization of these deferred tax assets. In addition, the Company has recorded a valuation allowance of $4.1 million against the federal deferred tax assets of Oculii Corp. Utilization of the net operating loss and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations as defined by the U.S. Internal Revenue Code Section 382, as amended, and similar state provisions. The annual limitation may result in the expiration of the U.S. Federal and state research credit carryforwards before utilization. The Company does not expect any net operating loss or tax credit carryforwards to expire as a result of a Section 382 limitation. The Company applies the provisions of FASB’s guidance on accounting for uncertainty in income taxes. As of January 31, 2023, the Company had approximately $21.7 million in unrecognized tax benefits, $14.8 million of which would affect the Company’s effective tax rate if recognized. The remainder of the unrecognized tax benefits would not affect the effective tax rate due to the full valuation recorded for state deferred tax assets. Certain fiscal year 2021 amounts have been revised to reflect unrecognized tax benefits on a gross basis. The following table sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:
|  | Year Ended January 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |
Beginning balance: |  | $ | 30,884 |  |  | $ | 29,527 |  |  | $ | 42,695 |
Additions based on tax positions related to the current year |  |  | 1,033 |  |  |  | 1,412 |  |  |  | 3,360 |
Additions for tax positions of prior years |  |  | 195 |  |  |  | 55 |  |  |  | 16 |
Reductions for tax positions in prior years |  |  | (45 | ) |  |  | — |  |  |  | (10,212 | )
Settlements for prior periods |  |  | — |  |  |  | — |  |  |  | (6,087 | )
Lapse of applicable statute of limitations |  |  | (10,411 | ) |  |  | (110 | ) |  |  | (245 | )
Ending balance: |  | $ | 21,656 |  |  | $ | 30,884 |  |  | $ | 29,527 |
The Company classified $3.2 million and $8.0 million of income tax liabilities as other long-term liabilities as of January 31, 2023 and 2022, respectively, because payment of cash or settlement is not anticipated within one year from the balance sheet date. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company recorded a benefit of $0.7 million, expense of $0.3 million and expense of $0.3 million for interest and penalties related to uncertain tax positions for the fiscal years ended January 31, 2023, 2022 and 2021, respectively. The benefit in fiscal year 2023 was due to the release of a prior year reserve upon lapse of statute of limitations. The Company recorded noncurrent liabilities of $0.6 million and $1.3 million related to interest and penalties for uncertain tax positions at January 31, 2023 and 2022, respectively. The primary jurisdiction where our foreign earnings are derived is the Cayman Islands, where the Company is domiciled. The Company files income tax returns in the U.S. federal jurisdiction as well as many U.S. state and foreign jurisdictions. The Internal Revenue Service has closed the examination of the Company’s U.S. federal income tax return for the fiscal year ended January 31, 2017. At January 31, 2023, the Company’s fiscal year 2020 through 2023 tax years are generally open and subject to potential examination by U.S. federal tax authorities. The Company’s fiscal year 2019 through 2023 tax years are generally open and subject to potential examination by state tax authorities. The Company’s fiscal years 2016 to 2023 remain open to examination by foreign tax authorities. Fiscal years outside of the normal statute of limitations remain open to audit by tax authorities due to tax attributes generated in those earlier years, which have been carried forward and may be audited in subsequent years when utilized. The Company regularly assesses the likelihood of adverse outcomes resulting from potential tax examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. During the fiscal year ended January 31, 2023, the gross amount of unrecognized tax benefits decreased by $9.2 million to $21.7 million. The decrease was primarily due to the release of prior year reserves upon the lapse of the statute of limitations. If the estimates of income tax liabilities prove to be less than the ultimate assessment, then a further charge to expense could be required. If events occur, and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities could result in tax benefits being recognized in the period in which the Company determines the liabilities are no longer necessary. The Company does not anticipate significant changes to its uncertain tax positions during the next twelve months. As of January 31, 2023, the Company’s long-term income taxes payable, including estimated interest and penalties, was approximately $3.8 million. The Company was unable to make a reasonably reliable estimate of the timing of payments in individual years due to uncertainties in the timing of tax audits, if any, or their outcomes. On July 27, 2015, the United States Tax Court issued a decision (“Tax Court Decision”) in Altera Corp. v. Commissioner, which concluded that related parties in a cost sharing arrangement are not required to share expenses related to share-based compensation. The Tax Court Decision was appealed by the Commissioner to the Ninth Circuit Court of Appeals (“Ninth Circuit”). On June 7, 2019, the Ninth Circuit issued an opinion that reversed the Tax Court Decision. On July 22, 2019, the taxpayer requested a rehearing before the full Ninth Circuit and the request was denied on November 12, 2019. On February 10, 2020, the taxpayer filed a petition to appeal the decision with the Supreme Court of the United States which was denied on June 22, 2020. The denial of the request by the Supreme Court did not have a material impact to the Company’s provision for income taxes.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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