Income Taxes

6 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Year-to-date income tax expense (benefit) is the product of the most current projected annual effective tax rate (“PAETR”) and the actual year-to-date pretax income (loss) adjusted for any discrete tax items. The income tax expense (benefit) for a particular quarter, except for the first quarter, is the difference between the year-to-date calculation of income tax expense (benefit) and the year-to-date calculation for the prior quarter. Items unrelated to current period ordinary income or (loss) are recognized entirely in the period identified as a discrete item of tax.

Annual Effective Tax Rate

The PAETR, which excludes the impact of discrete items, was 22.6% and 14.6% as of the six months ended March 31, 2022 and 2021, respectively. For the six months ended March 31, 2022, the PAETR was higher than the U.S. federal statutory rate of 21.0% primarily due to the mix of earnings between countries, most of which have higher statutory rates than the U.S., which was mostly offset by the impact of maintaining a valuation allowance that is provided on U.S. deferred tax assets. The current year PAETR was higher than the prior year’s rate due to an increase in projected pretax book income in countries with higher statutory tax rates.

The Company continues to maintain a full valuation allowance on U.S. federal and state net deferred tax assets (excluding the tax effects of deferred tax liabilities associated with indefinite lived intangibles) for the period ending March 31, 2022 as a result of pretax losses incurred since the Company’s inception in early 2014. The Company believes it is prudent to retain a valuation allowance until a more consistent pattern of earnings is established and net operating loss carryforwards begin to be utilized.

Current and Prior Period Tax Expense

For the three months ended March 31, 2022, the Company recognized income tax expense of $2,248 on pretax income of $9,622. The rate of 23.4% differed from the U.S. statutory rate of 21.0% as the mix of earnings between countries, most of which have higher statutory tax rates than the U.S., was mostly offset by the impact of maintaining a U.S. valuation allowance that is provided on U.S. deferred tax assets.

For the three months ended March 31, 2021, the Company recognized income tax expense of $2,701 on pretax income of $7,783. The rate of 34.7% differed from the U.S. statutory rate of 21.0% principally due to the impact of maintaining a U.S. valuation allowance against U.S. deferred tax assets.

For the six months ended March 31, 2022, the Company recognized income tax expense of $3,869 on pretax income of $17,331. The rate of 22.3% differed from the U.S. statutory rate of 21.0% as the mix of earnings between countries, most of which have higher statutory tax rates than the U.S., was mostly offset by the impact of maintaining a U.S. valuation allowance that is provided on U.S. deferred tax assets.

For the six months ended March 31, 2021, the Company recognized income tax expense of $3,785 on pretax income of $15,344. The rate of 24.7% differed from the U.S. statutory rate of 21.0% principally due to the unfavorable impact of discrete items related to an adjustment for prior periods and recording an uncertain tax position related to a tax audit in a foreign jurisdiction which were partially offset by the impact of maintaining a U.S. valuation allowance against U.S. deferred tax assets.At March 31, 2022 and 2021, the Company had gross unrecognized tax benefits of $2,071 and $1,752 respectively.