ServiceTitan, Inc. Income Taxes Disclosure
The domestic and foreign components of income (loss) before income taxes consists of the following (in thousands):
|
|
Fiscal |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
United States |
|
$ |
(157,432 |
) |
|
$ |
(232,515 |
) |
|
$ |
(194,132 |
) |
Foreign |
|
|
319 |
|
|
|
(4,261 |
) |
|
|
3,123 |
|
Loss before income taxes |
|
$ |
(157,113 |
) |
|
$ |
(236,776 |
) |
|
$ |
(191,009 |
) |
The income tax provision consists of the following (in thousands, except percentages):
|
|
Fiscal |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Current provision for income taxes |
|
|
|
|
|
|
|
|
|
|||
U.S. Federal |
|
$ |
(5 |
) |
|
$ |
86 |
|
|
$ |
— |
|
State |
|
|
284 |
|
|
|
369 |
|
|
|
42 |
|
Foreign |
|
|
770 |
|
|
|
681 |
|
|
|
2,268 |
|
Total–current provision for income taxes |
|
|
1,049 |
|
|
|
1,136 |
|
|
|
2,310 |
|
Deferred provision for (benefit from) income taxes |
|
|
|
|
|
|
|
|
|
|||
U.S. Federal |
|
|
808 |
|
|
|
1,211 |
|
|
|
1,357 |
|
State |
|
|
1,058 |
|
|
|
433 |
|
|
|
909 |
|
Foreign |
|
|
(175 |
) |
|
|
(462 |
) |
|
|
(440 |
) |
Total–deferred provision for income taxes |
|
|
1,691 |
|
|
|
1,182 |
|
|
|
1,826 |
|
Provision for (benefit from) income taxes |
|
$ |
2,740 |
|
|
$ |
2,318 |
|
|
$ |
4,136 |
|
Effective income tax rate |
|
|
(1.7 |
)% |
|
|
(1.0 |
)% |
|
|
(2.2 |
)% |
A reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows (in thousands, except percentages):
|
|
Fiscal 2026 |
|
|||||
Loss before income taxes |
|
$ |
(157,113 |
) |
|
|
|
|
Tax at federal statutory rate |
|
|
(32,994 |
) |
|
|
21.0 |
% |
State income taxes, net of federal income tax effect(1) |
|
|
1,061 |
|
|
|
(0.7 |
) |
Foreign tax effects |
|
|
528 |
|
|
|
(0.3 |
) |
Nontaxable or nondeductible items |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
(43,024 |
) |
|
|
27.4 |
|
Non-deductible executive compensation |
|
|
22,971 |
|
|
|
(14.6 |
) |
Other |
|
|
2,006 |
|
|
|
(1.3 |
) |
Tax credits |
|
|
|
|
|
|
||
Research and development credits |
|
|
(23,486 |
) |
|
|
14.9 |
|
Other |
|
|
(163 |
) |
|
|
0.1 |
|
Changes in unrecognized tax benefits |
|
|
336 |
|
|
|
(0.2 |
) |
Change in valuation allowance |
|
|
75,762 |
|
|
|
(48.2 |
) |
Other |
|
|
(257 |
) |
|
|
0.2 |
|
Effective income tax rate |
|
$ |
2,740 |
|
|
|
(1.7 |
)% |
(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include .
|
|
Fiscal |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Loss before income taxes |
|
$ |
(236,776 |
) |
|
$ |
(191,009 |
) |
Tax at federal statutory tax rate |
|
|
(49,723 |
) |
|
|
(40,112 |
) |
State taxes (net of federal benefit of state deduction) |
|
|
(7,106 |
) |
|
|
(7,334 |
) |
Change in valuation allowance |
|
|
60,057 |
|
|
|
63,276 |
|
Uncertain tax positions |
|
|
3,916 |
|
|
|
3,463 |
|
Non-deductible expenses |
|
|
1,435 |
|
|
|
345 |
|
Equity compensation |
|
|
2,501 |
|
|
|
4,451 |
|
Non-deductible executive compensation |
|
|
9,687 |
|
|
|
— |
|
Tax credits |
|
|
(19,354 |
) |
|
|
(17,317 |
) |
Other |
|
|
905 |
|
|
|
(2,636 |
) |
Provision for income taxes |
|
$ |
2,318 |
|
|
$ |
4,136 |
|
Effective income tax rate |
|
|
(1.0 |
)% |
|
|
(2.2 |
)% |
The temporary differences, which give rise to the Company’s deferred tax assets and liabilities consisted of the following (in thousands):
|
|
As of January 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
199,698 |
|
|
$ |
108,877 |
|
Research and development and other tax credits |
|
|
92,412 |
|
|
|
58,126 |
|
Lease liabilities |
|
|
12,906 |
|
|
|
15,340 |
|
Stock-based compensation |
|
|
14,704 |
|
|
|
30,911 |
|
Depreciable and amortizable assets |
|
|
19,900 |
|
|
|
13,025 |
|
Accrued bonus |
|
|
14,474 |
|
|
|
13,440 |
|
Other |
|
|
10,446 |
|
|
|
8,981 |
|
Capitalized research and development |
|
|
88,473 |
|
|
|
93,512 |
|
Interest expense carryforward |
|
|
9,115 |
|
|
|
12,922 |
|
Deferred tax assets |
|
|
462,128 |
|
|
|
355,134 |
|
Valuation allowance |
|
|
(416,021 |
) |
|
|
(317,872 |
) |
Deferred tax assets, net |
|
$ |
46,107 |
|
|
$ |
37,262 |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Right-of-use assets |
|
$ |
(4,438 |
) |
|
$ |
(6,020 |
) |
Deferred contract costs |
|
|
(6,835 |
) |
|
|
(5,321 |
) |
Goodwill |
|
|
(43,582 |
) |
|
|
(31,646 |
) |
Deferred tax liabilities |
|
|
(54,855 |
) |
|
|
(42,987 |
) |
Deferred tax liabilities, net |
|
$ |
(8,748 |
) |
|
$ |
(5,725 |
) |
In determining the need for a valuation allowance, management reviewed all available positive and negative evidence, primarily the prior and forecasted losses of the Company, and determined its U.S. deferred tax assets are not realizable under the more-likely-than-not measurement, and as such, a full valuation allowance was recorded against U.S. deferred tax assets as of January 31, 2026 and 2025, respectively.
As a result of the Company’s certain prior acquisitions, the Company generated indefinite-lived deferred tax liabilities from tax amortizable goodwill, which are not an available source of income for the realization of definite-lived deferred tax assets.
The following table summarizes the change in the Company’s valuation allowance (in thousands):
|
|
Fiscal |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Balance at the beginning of the year |
|
$ |
317,872 |
|
|
$ |
242,572 |
|
|
$ |
179,296 |
|
Increase recognized in income tax expense |
|
|
98,054 |
|
|
|
60,057 |
|
|
|
63,276 |
|
Increase related to business combinations |
|
|
95 |
|
|
|
15,243 |
|
|
|
— |
|
Balance at the end of the year |
|
$ |
416,021 |
|
|
$ |
317,872 |
|
|
$ |
242,572 |
|
As of January 31, 2026, the Company had cumulative U.S. net operating losses (“NOLs”) consisting of carryforwards for federal income tax purposes of $795.1 million, which have an indefinite carryforward period. As of January 31, 2026, the Company had cumulative state NOL carryforwards of $470.1 million. State NOL carryforwards will begin to expire in fiscal 2028.
As of January 31, 2026, the Company has federal research tax credit carryforwards of $60.1 million and state research tax credit carryforwards of $30.9 million. The Company’s federal research tax credit carryforwards will begin to expire in fiscal 2037, while its state research tax credit carryforwards will begin to expire in fiscal 2029. As of January 31, 2026, the Company has other state tax credit carryforwards of $1.0 million. The carryforwards will begin to expire in fiscal 2027.
NOLs and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code as well as similar state provisions. This could limit the
amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. The Company conducted a formal study through January 31, 2026 that concluded that there had been prior ownership changes and that the Company's utilization of pre-change tax attribute carryforwards will be subject to annual limitations. However, it is not expected that the annual limitations will result in the expiration of tax attribute carryforwards prior to utilization. Similar provisions of state tax law may also apply to limit the use of the Company's state tax attribute carryforwards.
Uncertain Tax Benefits
The Company has provided what it believes to be an appropriate amount of tax for items that involve interpretation of the tax law. However, events may occur in the future that will cause the Company to reevaluate its current reserves and may result in an adjustment to the reserve for taxes.
The following table summarizes the change in the Company’s reserve for unrecognized tax benefits (in thousands):
|
|
Fiscal |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Balance at the beginning of the year |
|
$ |
14,662 |
|
|
$ |
10,535 |
|
|
$ |
7,072 |
|
Increase due to new tax positions |
|
|
8,215 |
|
|
|
3,683 |
|
|
|
3,163 |
|
Increase due to existing tax positions |
|
|
504 |
|
|
|
233 |
|
|
|
300 |
|
Decrease due to existing tax positions |
|
|
(10 |
) |
|
|
— |
|
|
|
— |
|
Increase due to acquired tax positions |
|
|
5 |
|
|
|
211 |
|
|
|
— |
|
Balance at the end of the year |
|
$ |
23,376 |
|
|
$ |
14,662 |
|
|
$ |
10,535 |
|
As of January 31, 2026, the Company had $23.4 million of gross unrecognized tax benefits, of which an immaterial amount would impact the effective tax rate, if recognized. The remaining gross unrecognized tax benefits relate to income tax positions which, if recognized, would not impact the effective rate due to the valuation allowance against its federal and state deferred taxes.
Cash paid for income taxes, net of refunds, by jurisdiction for fiscal 2026 is as follows (in thousands):
|
|
Fiscal |
|
|
|
|
2026 |
|
|
U.S. Federal |
|
$ |
129 |
|
State |
|
|
|
|
Pennsylvania |
|
|
103 |
|
Texas |
|
|
100 |
|
Minnesota |
|
|
43 |
|
Florida |
|
|
42 |
|
Other |
|
|
144 |
|
Foreign |
|
|
|
|
Armenia |
|
|
464 |
|
Canada |
|
|
(200 |
) |
Total income taxes paid, net |
|
$ |
825 |
|
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. No tax years for the Company are currently under examination by the U.S. Internal Revenue Service or state and local tax authorities for income tax purposes. Due to net operating loss and tax credit carryforwards, all years are open for examination and may become subject to examination in the future.
The Company also files income tax returns in Armenia, starting in 2019. The Company’s tax return for 2021, through 2025 are subject to regular audit by the Armenian tax authorities for income tax purposes in fiscal 2027.
The Company also files income tax returns in Canada, starting in 2023. No tax years for the Company are currently under examination by the Canadian tax authorities for income tax purposes. The Company’s fiscal 2023 through fiscal 2025 remain open for examination and assessment.
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.