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Income Taxes
 12 Months Ended
Apr. 27, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before provision (benefit) for income taxes consists of the following (in thousands):
Year Ended
April 27, 2024April 29, 2023April 30, 2022
United States$8,611 $4,469 $2,512 
International(31,356)(22,383)(24,725)
$(22,745)$(17,914)$(22,213)
The components of income tax expense (benefit) are summarized as follows (in thousands):
Year Ended
April 27, 2024April 29, 2023April 30, 2022
Current
Federal$2 $(24)$224 
State3 2 (25)
International1,484 762 1,292 
Total current tax expense 1,489 740 1,491 
Deferred
Federal3,092 (2,005)(1,163)
State359 (218)(142)
International684 116 (223)
Total deferred tax expense (benefit) 4,135 (2,107)(1,528)
Total tax expense (benefit)$5,624 $(1,367)$(37)
The tax effects of significant items comprising the Company’s deferred taxes are as follows (in thousands):
April 27, 2024April 29, 2023
Deferred tax assets:
Accrued expense$1,063 $941 
Net operating losses4,443 1,284 
Research and development credits15,990 9,401 
Share compensation2,310 1,907 
Lease liability3,154 3,487 
Intangibles157 — 
Others— 5 
Total deferred tax assets27,117 17,025 
Deferred tax liabilities
Property and equipment basis(1,774)(1,132)
Right of use assets(2,980)(3,353)
Others(8)— 
Total deferred tax liabilities(4,762)(4,485)
Valuation allowance(23,258)(9,306)
Net deferred taxes $(903)$3,234 
A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. As of April 27, 2024, the Company recorded $23.3 million of valuation allowance. In fiscal year 2024, the valuation allowance increased by $14.0 million. The Company continues to maintain a valuation allowance on its U.S. R&D credits and recorded an increase to its valuation allowance of $6.7 million. During the fourth quarter of fiscal year 2024, the Company determined that utilization of its net deferred tax assets in the U.S. was limited and accordingly recorded an increase to its valuation allowance of $7.3 million. This determination was made after evaluating both the positive and negative evidence regarding the recoverability of the Company’s net U.S. deferred tax assets. The Company considers all available evidence such as its earnings history including the existence of cumulative income or losses, reversals of taxable temporary differences, projected future taxable income, and tax planning strategies and determined that negative evidence overweighted positive evidence with respect to the ability to realize its net U.S. deferred tax assets. The Company will continue to assess the future realization of its deferred tax assets in each applicable jurisdiction and adjust the valuation allowance accordingly. As of April 27, 2024, the Company had U.S. federal and state net operating loss carryforwards of approximately $18.7 million and $7.4 million, respectively. The U.S. federal net operating loss carryforwards can be carried forward indefinitely. The state net operating loss carryforwards will begin to expire in fiscal 2043. As of April 27, 2024, the Company had U.S. federal and state research credits of $12.6 million and $9.6 million, respectively. The federal research credits will begin to expire in 2039. The state research credits have no expiration date. As of April 27, 2024, the Company had no foreign tax credit carryover. Internal Revenue Code Section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. In the event that we had a change of ownership, utilization of the net operating loss and tax credit carryforwards may be restricted.
A summary activity of the valuation allowance is as follows (in thousands):
April 27, 2024April 29, 2023
April 30, 2022
Beginning valuation allowance
$9,306 $5,170 $3,706 
Additions
13,9524,136 1,464 
Ending valuation allowance
$23,258 $9,306 $5,170 
Foreign earnings may be subject to withholding taxes in local jurisdictions if they are distributed. The amount of cumulative undistributed earnings that are permanently reinvested that could be subject to withholding taxes were $25.7 million as of April 27, 2024. The Company intends to reinvest these earnings indefinitely.
The Company consists of a Cayman Islands parent holding company with various international and U.S. subsidiaries. The applicable statutory rate in Cayman Islands is zero for the Company for the years ended April 27, 2024, April 29, 2023 and April 30, 2022. For purposes of the reconciliation between the provision for income taxes at the statutory rate and the effective tax rate, a U.S. statutory tax rate of 21% for the years ended April 27, 2024, April 29, 2023 and April 30, 2022 is applied as follows:
Year Ended
April 27, 2024April 29, 2023April 30, 2022
Statutory federal tax expense rate21 %21 %21 %
State tax, net of federal benefit(2)%1 %1 %
Research tax credits20 %14 %4 %
Share compensation24 %18 %7 %
Other(1)%1 %1 %
Foreign rate differential(34)%(32)%(26)%
Change in valuation allowance(49)%(15)%(4)%
Withholding taxes(4)%(1)%(4)%
Effective tax rate(25)%8 %— %
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
April 27, 2024April 29, 2023
Beginning gross unrecognized tax benefits $2,865 $1,844 
Additions for tax positions taken in the current year1,9881,081 
Subtractions for tax positions taken in the prior year(210)(60)
Lapses in statute of limitations(69)— 
Ending gross unrecognized tax benefits $4,574 $2,865 
The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on such position’s technical merits as of the reporting date and only in an amount more likely than not to be sustained upon review by the tax authorities.
Included in the balance of unrecognized tax benefits as of April 27, 2024 and April 29, 2023 were potential benefits of $4.6 million and $2.9 million, respectively, which if recognized, would potentially affect the effective tax rate. If the unrecognized tax benefits were recognized, it would result in additional deferred tax assets, which are expected to require a full valuation allowance based on the Company’s current valuation allowance position. Unrecognized tax benefits are not expected to significantly increase or decrease within the next 12 months.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. For the years ended April 27, 2024, April 29, 2023 and April 30, 2022, the Company’s current tax provision was not impacted by interest and penalties.
The Company files U.S. federal and state and non-U.S. income tax returns with varying statutes of limitations. The Company’s tax returns continue to remain subject to examination by U.S. federal authorities for the years ended April 30, 2021 through 2023 and by state authorities for the years ended April 30, 2020 through 2023. For the Company’s international subsidiaries, the tax years that remain open to examination vary based on the year that each entity began operating.