Income Taxes

12 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income (loss) before income taxes were as follows (in thousands):

	Fiscal Year Ended March 31,
	2022		2021		2020
Domestic	$	(238,068)	$	(193,262)	$	(93,687)
Foreign	6,286		2,931		2,919
Total	$	(231,782)	$	(190,331)	$	(90,768)

The components of the provision for income taxes were as follows (in thousands):

	Fiscal Year Ended March 31,
	2022		2021		2020
Current Provision:
Federal	$	—	$	—	$	(1,177)
State	276		(9)		34
Foreign	1,385		685		1,632
Total current provision	1,661		676		489
Deferred Provision:
Federal	(1,120)		35		—
State	(64)		(96)		—
Foreign	(154)		(56)		(278)
Total deferred provision	(1,338)		(117)		(278)
Total income tax provision	$	323	$	559	$	211

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consisted of the following:

	Fiscal Year Ended March 31,
	2022		2021		2020
Federal statutory rate	21.0	%	21.0	%	21.0	%
Effect of:
State taxes, net of federal benefits	3.5		3.0		3.0
Stock-based compensation	3.8		(1.5)		(0.4)
Research and development credits, net of ASC 740-10	2.5		2.4		5.1
Permanent items	(4.4)		(2.4)		(4.0)
Foreign taxes	—		0.2		0.4
Intraperiod allocation	—		—		1.5
Other	0.5		0.7		0.7
Valuation allowance	(27.0)		(23.7)		(27.5)
Effective tax rate	(0.1)	%	(0.3)	%	(0.2)	%

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. The following table presents the significant components of the Company’s deferred tax assets and liabilities for the periods presented (in thousands):

	As of March 31,
	2022		2021
Deferred tax assets:
Accrued expenses	$	2,568	$	3,429
Depreciation and amortization	5,657		3,518
Capitalized research and development	24,050		—
Net operating loss and other attribute carryforwards	196,159		178,535
Stock based compensation	20,695		14,987
Research and development credits	31,695		25,932
Lease liability	13,349		15,208
Convertible debt	3,638		—
Other	4,530		378
Gross deferred tax assets	302,341		241,987
Valuation allowance	(276,475)		(198,794)
Total deferred tax assets	25,866		43,193
Deferred tax liabilities:
Prepaids	(4,268)		(3,949)
Intangibles	(2,679)		(1,923)
Capitalized research and development	—		(4,405)
Deferred contract acquisition costs	(7,326)		(15,520)
Convertible debt	—		(3,991)
Right of use asset	(10,809)		(12,748)
Total deferred tax liabilities	(25,082)		(42,536)
Total net deferred tax assets/(liabilities)	$	784	$	657

The Company accounts for deferred taxes under ASC 740, Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that we weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. Based upon

the weight of available evidence, which includes the Company’s historical operating performance and the U.S. and Japan cumulative net losses in all prior periods, the Company has provided a valuation allowance against its U.S. and Japan deferred tax assets. Overall, the valuation allowance increased by $77.7 million and $47.5 million for the years ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the Company has U.S. federal and state net operating losses of approximately $776.7 million and $449.3 million, respectively, which expire beginning in the years 2028 and 2020. Of the $776.7 million federal net operating losses, $355.2 million are carried forward indefinitely but are limited to 80% of taxable income. The remaining $421.5 million begin to expire in 2028. As of March 31, 2022, the Company also has Federal, California and Oregon research and development credits of $37.4 million, $6.1 million, and $1.0 million, respectively. The federal tax credit carryforwards will expire beginning in 2028 if not utilized. The California credit carryforwards do not expire. The Oregon tax credit carryforwards began to expire in 2020.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Code, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Section 382 of the Code (“Section 382”) ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of the Company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. The Company did experience one or more ownership changes in financial periods ending on or before March 31, 2022. In this regard, the Company has determined that based on the timing of the ownership changes and the corresponding Section 382 limitations, none of its net operating losses or other tax attributes are subject to such limitation.

The Company has adopted authoritative guidance which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in the Company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company had unrecognized tax benefits of $15.0 million, $12.2 million, and $10.3 million as of March 31, 2022, 2021, and 2020. As of March 31, 2022, if recognized, the unrecognized tax benefit of $14.8 million would not affect income tax expense before consideration of any valuation allowance. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

Balance at March 31, 2019	$	7,997
Additions based on tax positions taken during the current period	2,183
Additions based on tax positions taken during the prior period	687
Reductions based on tax positions taken during the prior period	(529)
Balance at March 31, 2020	10,338
Additions based on tax positions taken during the current period	2,667
Additions based on tax positions taken during the prior period	703
Reductions based on tax positions taken during the prior period	(1,549)
Balance at March 31, 2021	12,159
Additions based on tax positions taken during the current period	2,920
Additions based on tax positions taken during the prior period	430
Reductions based on tax positions taken during the prior period	(521)
Balance at March 31, 2022	$	14,988

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statement of operations. Accrued interest and penalties have not been material for the fiscal years ended March 31, 2022, 2021, and 2020.