Income Taxes

12 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

Loss before provision for income taxes on the accompanying statements of operations and comprehensive loss included the following components (in thousands):

	Years Ended June 30,
	2024			2023			2022
Domestic	$	(25,184	)	$	(17,489	)	$	(14,092	)
Foreign		13,364			10,701			12,090
Total loss before provision for income taxes	$	(11,820	)	$	(6,788	)	$	(2,002	)

The provision for income taxes consisted of the following (in thousands):

	Years Ended June 30,
	2024		2023		2022
Current:
Federal	$	—	$	—	$	—
State		133		—		25
Foreign		2,190		2,036		1,535
Total current	$	2,323	$	2,036	$	1,560
Deferred:
Federal		—		—		—
State		—		—		—
Foreign		1,402		456		1,785
Total deferred		1,402		456		1,785
Total provision for income taxes	$	3,725	$	2,492	$	3,345

A reconciliation of income taxes at the statutory federal income tax rate to the provision for income taxes included in the accompanying consolidated statements of operations and comprehensive loss is as follows (in thousands):

	Years Ended June 30,
	2024			2023			2022
U.S. federal taxes (benefit):
At federal statutory rate	$	(2,482	)	$	(1,426	)	$	(420	)
State tax, net of federal benefit		133			—			25
Share-based compensation expense		629			1,189			592
Research and development credits		(209	)		(1,181	)		(415	)
Foreign taxes		(167	)		(164	)		(948	)
Deferred tax on foreign earnings		952			408			1,730
Global intangible low-taxed income		1,335			927			2,124
Change in valuation allowance		3,202			2,546			502
Other non-deductible permanent items		332			193			252
Other		—			—			(97	)
Total provision for income taxes	$	3,725		$	2,492		$	3,345

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 net deferred tax assets (liabilities) were as follows (in thousands):

	June 30,
	2024			2023
Deferred tax assets:
Federal and state net operating losses	$	66,463		$	69,157
Accrued expenses and reserves		4,523			7,083
Lease liability		6,332			5,401
Deferred revenue		3,269			4,275
Research and development credits		26,669			26,425
Share-based compensation expense		1,405			1,367
Capitalized research and development		19,464			13,042
Unicap		541			587
Fixed assets/intangibles		644			946
Section 163(j) interest		2,776			1,702
Other		6			245
Total deferred tax assets		132,092			130,230
Deferred tax liabilities:
Contract acquisition costs		(1,228	)		(1,602	)
Right of use assets		(5,288	)		(4,941	)
Deferred tax on foreign earnings		(2,499	)		(1,547	)
Total deferred tax liabilities		(9,015	)		(8,090	)
Valuation allowance		(125,944	)		(123,528	)
Net deferred tax liabilities	$	(2,867	)	$	(1,388	)

As of June 30, 2024, the Company had $281.9 million and $124.5 million in federal and state net operating loss carryforwards, respectively. The federal and state carryforwards expire in varying amounts beginning in 2029 for federal and 2025 for state purposes.

In addition, as of June 30, 2024, the Company had federal and state research and development tax credits of $28.4 million and $22.8 million, respectively. If not utilized, the federal research credits will begin to expire in 2025, the California research credits have no expiration date and the other state research credits will begin to expire in 2025.

Under the Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of our net operating loss and research tax credit carryforwards to offset taxable income may be limited based on cumulative changes in ownership. Although ownership changes have occurred in the prior years, the carryovers should be available for utilization by the Company before they expire, provided the Company generates sufficient future taxable income. An analysis of the impact of this provision through March 31, 2022 has been performed and it was determined that no ownership change has occurred after December 2009.

Based on the available objective evidence and history of losses, the Company has established a 100% valuation allowance against its combined domestic net deferred tax assets because of uncertainty surrounding the realization of such deferred tax assets.

Certain income earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs United States shareholder. The income required to be included in gross income is referred to as global intangible low tax income (“GILTI”) and is defined under IRC Section 951A as the excess of the shareholder’s net CFC tested income over the net deemed tangible income return. The GILTI inclusion amount has been absorbed by net operating loss carryforwards. The Company has made a policy decision to record GILTI tax as a current-period expense when incurred.

One of the provisions under the Tax Cuts and Jobs Act that became effective in tax years beginning after December 31, 2021 required the capitalization and amortization of research and experimental expenditures. The change in this United States tax law did not have an impact on the Company's consolidated financial statements. The Company will continue to evaluate the impact of this tax law change on future periods.

At June 30, 2024, the Company has $2.5 million of deferred tax liability related to withholding tax expected to be paid on the remittance of unrepatriated distributable reserves in France, Japan and Switzerland. At June 30, 2024, the Company has undistributed earnings of certain foreign subsidiaries of $14.7 million that it has indefinitely invested, and on which it has not recognized deferred taxes.

The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands):

	Years Ended June 30,
	2024			2023			2022
Balance at beginning of year	$	21,565		$	19,810		$	18,765
Tax positions related to current year:
Additions		1,064			1,692			1,222
Tax positions related to prior years:
Additions		—			652			61
Reductions		(585	)		(589	)		(238	)
Balance at end of year	$	22,044		$	21,565		$	19,810

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions with respect to legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business. The reduction in prior year's tax positions primarily relates to lapses of applicable statutes of limitations. The Company anticipates there will be no material changes in uncertain tax positions in the next 12 months. As of June 30, 2024, the amount of gross unrecognized tax benefits was $22.0 million, of which $21.6 million would not affect income tax expense before consideration of any valuation allowance.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2024 and 2023, the Company’s cumulative accrued interest and penalties related to uncertain tax positions, was not material.

The Company files income tax returns in the United States federal, various states, and foreign jurisdictions. Due to tax attributes being carried forward and utilized during open years, the statute of limitations remains open for the U.S. federal jurisdiction and domestic states for tax years from 2002 and forward. The statutes of limitation with respect to the foreign jurisdictions where the Company files income tax returns vary from jurisdiction to jurisdiction and range from 3 to 10 years and the material foreign jurisdictions are France, Switzerland and Japan.

The Company is also subject to examination of its income tax returns by the Internal Revenue Service (“IRS”) and other foreign tax authorities, and in some cases the Company has received additional tax assessments which have not been significant. The Company is under audit by the Indian tax authorities for the fiscal year 2021 and 2023 and we do not expect a material impact on the consolidated financial statements.