Income Taxes |
6 Months Ended |
|---|---|
Jul. 31, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 9. Income Taxes The Company’s provision for income taxes for the three and six months ended July 31, 2026 and 2025 is based on the estimated annual effective tax rate, in addition to discrete items. The Company’s effective tax rate for the three and six months ended July 31, 2026 was tax expense of 32.4% and tax expense of 127.0%, respectively. Both differ from the U.S. federal statutory rate of 21% primarily as a result of a valuation allowance against the Company’s U.S. operations. The Company's effective tax rate for the three and six months ended July 31, 2025 was a tax benefit of 117.2% and a tax benefit of 67.1%, respectively. Both differ from the U.S. federal statutory rate of 21%, primarily due to the forecasted allocation of income for the current fiscal year and from the mix of jurisdictional income at differing statutory rates. The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. The valuation allowance was $19.9 million and $18.3 million as of July 31, 2026 and January 31, 2026, respectively. The increase in the valuation allowance for the six months ended July 31, 2026, was treated as a component of the estimated annual effective tax rate. The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be realized in accordance with ASC 740, Income Taxes. Due to the declines in revenue and profitability in prior periods and the weighing of all positive and negative objective evidence considered, the Company has limited ability to rely on subjective factors, including projected future growth, in evaluating whether its deferred tax assets will be realized. As such, the Company previously determined in FY2026 that it was no longer able to conclude that it is more likely than not that its U.S. deferred tax assets will be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods in the event sufficient evidence is present to support a conclusion that it is more likely than not that all or a portion of its U.S. deferred tax assets will be realized. With the exception of our UK and China subsidiaries for which we accrue relevant deferred tax impacts related to non-indefinitely reinvested cash, we consider the excess of the amount for financial reporting over the tax basis (including undistributed and previously taxed earnings) of investments in our other foreign subsidiaries as of July 31, 2026 to be indefinitely reinvested in the foreign jurisdictions on the basis of our specific plan for reinvestment and estimates that future U.S. cash generation will be sufficient to meet future U.S. cash needs. Therefore, we have not provided for deferred taxes related to such excess or the relevant portions thereof and disclosed that the determination of any deferred taxes related to this excess is not practicable in those permanently reinvested jurisdictions. We have made no changes to our policy on indefinite reinvestment during the three months ended July 31, 2026. During the three months ended July 31, 2026, the Company paid a dividend from its operations in China to the U.S. parent entity of $2.5 million, of which $0.3 million was remitted for withholding taxes in China that were previously accrued for under the Company’s current repatriation policy.
On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law in the U.S. The OBBBA contains various changes to key U.S. federal income tax laws. The Company does not expect a material impact to its overall income tax provision as a result of this newly enacted legislation. |