

	Fiscal Year Ended June 30,
	2019			2018 As Adjusted⁽¹⁾			2017 As Adjusted⁽¹⁾
United States	$	(35,763	)	$	(42,683	)	$	(31,569	)
Foreign	4,558			2,861			2,874
Loss before provision for income taxes	$	(31,205	)	$	(39,822	)	$	(28,695	)



	Fiscal Year Ended June 30,
	2019			2018 As Adjusted⁽¹⁾			2017 As Adjusted⁽¹⁾
Current income taxes:
Federal	$	—		$	—		$	(435	)
State	14			32			(1,075		)
Foreign	1,598			1,048			2,131
Total current income taxes	1,612			1,080			621
Deferred income taxes:
Federal	(76		)	—			—
State	—			—			—
Foreign	(253		)	(68		)	220
Total deferred income taxes	(329		)	(68		)	220
Total provision for income taxes	$	1,283		$	1,012		$	841



	Fiscal Year Ended June 30,
	2019			2018 As Adjusted⁽¹⁾			2017 As Adjusted⁽¹⁾
Tax at federal statutory tax rate	$	(6,553	)	$	(11,150	)	$	(10,044	)
State taxes—net of federal benefit	15			32			(1,075		)
Non-deductible expenses	110			88			108
Goodwill impairment	537			746			—
Foreign withholding taxes	340			527			1,737
Foreign income taxed at different rates	(66		)	(309		)	(323		)
Stock-based compensation expense	1,002			653			849
Tax exempt income	(94		)	(136		)	(33		)
Change in valuation allowance	5,507			(8,396		)	10,039
One-time transition tax	—			44			—
Remeasurement of deferred tax assets and liabilities	—			18,900			—
FIN 48	114			15			(479		)
GILTI inclusion	451			—			—
Other	(80		)	(2		)	62
Total provision for income taxes	$	1,283		$	1,012		$	841

Our provision for income taxes was $1.3 million in fiscal 2019 compared to $1.0 million in fiscal 2018. Our effective tax rate was 4% in fiscal 2019 compared to an effective tax rate of 3% in fiscal 2018. Our effective tax rate in fiscal 2019 and fiscal 2018 was attributable primarily to foreign withholding taxes and income taxes in certain foreign jurisdictions. Our effective tax rate in fiscal 2017 was attributable primarily to foreign withholding taxes and income taxes in certain foreign jurisdictions, partially offset by the reversal of tax reserves related to the settlement of our New York state and IRS tax audits. Our provision for income taxes was $841,000 in fiscal 2017.

Our effective tax rate of 4% and 3% in fiscal 2019 and 2018, respectively, was lower than the tax computed at the U.S. federal statutory income tax rate due primarily to losses for which no benefit will be recognized since they are not more likely than not to be realized due to the lack of current and future income and the inability to carry back losses within the two year carryback period.

In May 2017, the Internal Revenue Service, or IRS, completed its audit of our income taxes for fiscal 2012 through fiscal 2015. The audit resulted in a $947,000 reduction of our research and development tax credit carryforwards and we recorded a tax benefit of $425,000 to reverse the related tax reserves.

The ability to carry back losses for a refund of prior taxes paid was eliminated under the Tax Cuts and Jobs Act, which impacts our losses incurred during fiscal 2019 and 2018.

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



	June 30,
	2019			2018 As Adjusted⁽¹⁾
Deferred tax assets:
Federal, state and foreign net operating losses	$	57,809		$	55,540
Federal and state tax credits	14,104			12,195
Stock-based compensation	2,885			3,481
Accrued expenses and reserves	13,659			9,395
Capitalized expense	34			60
Unrealized losses	481			609
Property and equipment	43			—
Acquired intangible assets	768			652
Total deferred tax assets	89,783			81,932
Deferred tax liabilities:
Property and equipment	(79		)	(29		)
Capitalized software	(17,848		)	(13,222		)
Deferred revenue	(22,486		)	—
Unrealized gains	(236		)	(451		)
Total deferred tax liabilities:	(40,649		)	(13,702		)
Deferred tax assets, net of liabilities:	49,134			68,230
Valuation allowance — worldwide	(48,370		)	(67,702		)
Net deferred tax assets	$	764		$	528

All available evidence, both positive and negative, was considered to determine whether, based upon the weight of the evidence, a valuation allowance for deferred tax assets is needed. As of June 30, 2019, we recognized deferred tax assets of $939,000 from foreign jurisdictions and a deferred tax liability of $175,000 from a foreign jurisdiction, for net deferred tax assets of $764,000.

Due to operating losses in previous years and continued earnings volatility, we maintain a valuation allowance on the majority of our deferred tax assets, net of liabilities, since the assets are not more likely than not to be realized based upon our assessment of all positive and negative evidence. Realization of deferred tax assets is dependent upon future taxable earnings and losses, the timing of which is uncertain. Due to losses in previous years, and expected losses in fiscal 2020 and potentially

future years in the U.S., we maintained a full valuation allowance on deferred tax assets in the U.S. Due to operating losses in previous years and expected losses in future years, we continued to maintain a full valuation allowance for our foreign deferred tax assets in the United Kingdom. Our valuation allowance increased (decreased) from the prior year by approximately $(19.3) million, $13.9 million, and $25.9 million in fiscal 2019, 2018 and 2017, respectively.

The impact of our adoption of ASC 606 was to reduce deferred revenue and deferred costs and accelerate the recognition of such revenue and costs. For tax purposes, the acceleration of income is reported in the current and future fiscal years and, accordingly, we have established a deferred tax liability. The impact of the new standard on income tax expense was not material since it resulted in the reduction of deferred tax assets and liabilities with a corresponding adjustment to our valuation allowance.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”), a tax reform bill which, among other items, reduces the current corporate federal income tax rate to 21% from 35%, was signed into law. The rate reduction was effective January 1, 2018.

The Act caused the Company’s deferred tax assets and deferred tax liabilities to be revalued. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Due to the full valuation allowance placed against our U.S. deferred tax assets, any change in our gross deferred tax assets will have no impact to income tax expense.

The value of deferred tax assets, net of liabilities decreased by $18.9 million as of January 1, 2018 due to the reduction in the federal corporate tax rate, which had no impact to income tax expense during fiscal 2018 due to the full valuation allowance placed on the assets.

We provide for U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are permanently reinvested outside the U.S. As of June 30, 2019, the cumulative amount of earnings upon which U.S. income taxes have not been provided was approximately $9.4 million. The net unrecognized deferred tax liability for these earnings was $364,000, which is primarily due to withholding taxes imposed if the dividend was distributed.

As of June 30, 2019, we had federal and California net operating loss carryforwards for income tax purposes of $250.2 million and $14.3 million, respectively. Federal loss carryforwards of $116.3 million will begin to expire in fiscal 2020, while $133.9 million of federal loss carryforwards can be carried forward indefinitely under the Act. Loss carryforwards have begun to expire for California purposes. In addition, we had federal and California research and development tax credit carryforwards of $7.0 million and $11.5 million, respectively, as of June 30, 2019. The federal research credits will begin to expire in fiscal 2023 and the California research credits can be carried forward indefinitely. The loss carryforwards and certain credits are subject to annual limitation under Internal Revenue Code Section 382.

As of June 30, 2019, we also had foreign net operating loss carryforwards of $3.5 million, which can be carried forward indefinitely. Due to uncertainty regarding our ability to utilize the foreign net operating loss carryforwards in certain jurisdictions, we have placed a valuation allowance of $0.5 million on these deferred tax assets.



	Fiscal Year Ended June 30,
	2019			2018		2017
Unrecognized tax benefit—beginning of period	$	3,820		$	3,035	$	6,662
Increase in tax positions taken during the current period	825			785		678
Increase in tax positions taken during the prior period	181			—		242
Decrease in tax positions taken during the prior period	(128		)	—		—
Decrease in tax positions due to settlements	(98		)	—		(4,086		)
Lapse of statute of limitations	—			—		(461		)
Unrecognized tax benefit—end of period	$	4,600		$	3,820	$	3,035

We file income tax returns in the U.S. with the IRS, California, various states, and foreign tax jurisdictions in which we have subsidiaries. The statute of limitations remains open for fiscal 2016 through fiscal 2018 for federal tax purposes, for fiscal 2014 through fiscal 2018 in state jurisdictions, and for fiscal 2014 through 2018 in foreign jurisdictions. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized.