Income Taxes

12 Months Ended

Mar. 31, 2026

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

For the year ended March 31, income before income taxes consisted of the following:

(In thousands)	2026		2025		2024
Income before income taxes
United States	$	41,197	$	10,837	$	12,492
Foreign		7,211		14,798		8,192
Total income before income taxes	$	48,408	$	25,635	$	20,684

For the year ended March 31, income tax expense (benefit) consisted of the following:

(In thousands)	2026			2025			2024
Income tax provision (benefit)
Current:
Federal	$	—		$	—		$	—
State and local		358			601			370
Foreign		1,363			2,493			1,884
Deferred:
Federal		6,510			2,488			(57,065	)
State and local		1,986			(227	)		(8,131	)
Foreign		(600	)		(2,945	)		(2,569	)
Income tax provision (benefit)	$	9,617		$	2,410		$	(65,511	)

For the year ended March 31, income taxes paid consisted of the following:

(In thousands)	2026
Income taxes paid
U.S. Federal	$	—
U.S. State and Local
California		125
Other*		658
Foreign
India		1,136
Other*		147
Total income tax paid	$	2,066

*For the year ended March 31, 2026, there were no other individual jurisdictions with cash taxes paid that equaled or exceeded 5% of total income tax paid.

The following tables present the principal components of the difference between the effective tax rate and the U.S. federal statutory income tax rate for the years ended March 31:

(In thousands)	2026			%
Income tax expense at the U.S. federal statutory rate	$	10,165			21.0	%
Expense for state taxes, net of federal effect		1,264			2.6
Impact of foreign operations - India		585			1.2
Impact of foreign operations - other		(775	)		(1.6	)
Share-based compensation		(1,710	)		(3.5	)
U.S. federal R&D credits		(808	)		(1.7	)
Effects of cross border tax laws: NCTI		1,338			2.8
Change in valuation allowance - U.S. state		(361	)		(0.7	)
Change in valuation allowance - foreign		39			0.1
Change in liability for unrecognized tax benefits		(45	)		(0.1	)
Provision to return - U.S. federal		(263	)		(0.5	)
Provision to return - U.S. state		(434	)		(0.9	)
Provision to return - foreign		(158	)		(0.3	)
Deferred adjustments - U.S. federal		993			2.1
Deferred adjustments - U.S. state		113			0.2
Other		(326	)		(0.8	)
Income tax provision	$	9,617			19.9	%

The fiscal 2026 tax provision was different than the statutory rate due primarily to excess tax benefits associated with share-based compensation, Net Controlled Foreign Corporation Tested Income (NCTI), previously global intangible low-taxed income (GILTI), and U.S. R&D credits.

(In thousands)	2025			2024
Income tax expense at the U.S. Federal statutory rate	$	5,383		$	4,344
Expense for state taxes		768			293
Impact of foreign operations		(673	)		(250	)
R&D credits		(2,091	)		(3,540	)
GILTI		2,907			1,471
Rate change		(1,157	)		(1,817	)
Change in valuation allowance		(1,610	)		(65,023	)
Change in liability for unrecognized tax benefits		—			(1,044	)
Share-based compensation		(60	)		(1,823	)
Deferred adjustments		(357	)		1,927
Provision to return		(884	)		(219	)
Other		184			170
Income tax provision (benefit)	$	2,410		$	(65,511	)

We have elected to account for GILTI inclusions in the period in which they are incurred.

The fiscal 2025 tax provision results primarily from the benefits of U.S. R&D credits, GILTI, the rate change of Special Economic Zone deferred taxes and the release of the valuation allowances against foreign deferred tax assets. The fiscal 2025 tax provision differs from the statutory rate primarily due to the release of foreign valuation allowances and the benefit of U.S. R&D credits.

The fiscal 2024 tax provision results primarily from the release of the valuation allowances against U.S. Federal and State deferred tax assets.

Deferred tax assets and liabilities as of March 31, are as follows:

(In thousands)	2026			2025
Deferred tax assets:
Accrued liabilities	$	8,582		$	8,663
Allowance for expected credit losses and doubtful accounts		220			121
Federal losses and credit carryforwards		17,218			20,429
Foreign losses and credit carryforwards		2,916			3,325
State losses and credit carryforwards		6,238			6,261
Deferred revenue		465			368
Capitalized research expenses		27,191			32,410
Operating lease liabilities		4,466			5,372
Goodwill and other intangible assets		(520	)		(574	)
Other		162			426
		66,938			76,801
Less: valuation allowance		(958	)		(1,340	)
Total		65,980			75,461
Deferred tax liabilities:
Operating lease right-of-use assets		(3,204	)		(3,961	)
Goodwill and other intangible assets		(13,105	)		(13,958	)
Property and equipment and software amortization		(1,746	)		(2,007	)
Total		(18,055	)		(19,926	)
Total deferred tax assets, net	$	47,925		$	55,535

At March 31, 2026, we had $10.5 million of federal net operating loss carryforwards that expire, if unused, in fiscal year 2039, and $42.5 million of federal net operating loss carryforwards that can be carried forward indefinitely. Our Hong Kong, Singapore, and the U.A.E. subsidiaries have $0.6 million, $0.6 million, and $0.1 million of net operating loss carryforwards, respectively. The losses for Hong Kong, Singapore and the U.A.E. can be carried forward indefinitely. Our India subsidiary operates in a “Special Economic Zone” (SEZ). One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first 5 years of operations which included fiscal 2018 through fiscal 2022. The India subsidiary is then subject to 50% of regular India income taxes during the second five years of operations which

includes fiscal 2023 through fiscal 2027. The aggregate value of the benefit of the SEZ during the current fiscal year is $4.1 million as of March 31, 2026. The Company has paid minimum alternative taxes during the period of regular tax relief resulting in a credit of $1.6 million as of March 31, 2026.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in the Company’s fiscal 2026, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of accelerated fixed asset depreciation and modifications to the international tax framework. We applied the relevant changes to the Company’s income tax provision for the year ended March 31, 2026, which did not materially impact the Company’s consolidated tax position. We expect future cash tax savings resulting from the full expensing of U.S. research and development expenses under the OBBBA. OBBBA also amended and extended to calendar year 2030 the statute of limitations for employee retention credits under the CARES Act for certain employment taxes incurred during the three months ended September 30, 2021. The amendment and extension does not impact our recognition and measurement of credits under ASU 2025-10.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a stimulus bill which was in response to economic consequences of the COVID-19 pandemic. The CARES Act provided an employee retention credit, which is a refundable tax credit against certain employment taxes. We filed our employee retention credit claims under the CARES Act during January 2024. In accordance with ASU 2025-10, which we adopted early effective as of April 1, 2025, as permitted, we record any credits for which collection is probable after considering all facts and circumstances including whether any statutes of limitations apply. We consider collection probable once we receive confirmation that the Internal Revenue Service has processed our claim for the credit, and we know the amount of the credit plus any associated interest to be refunded. During the years ended March 31, 2026 and 2025, we recorded $9.2 million and $0.5 million, respectively, of employee retention credits including associated interest received or expected to be received in cash as other (gains) charges, net, in the Consolidated Statements of Operations. As of March 31, 2026, we recorded $3.0 million of employee retention credits receivable in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet. We expect no future employee retention credit claims under the CARES Act.

At March 31, 2026 we also had $112.2 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2027 through 2046.

We have recorded valuation allowances offsetting certain deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. At March 31, 2026, the total valuation allowance against deferred tax assets of $1.0 million was comprised of $0.9 million for U.S. state deferred tax assets, and $0.1 million associated with deferred tax assets in the U.A.E. The ultimate realization of deferred tax assets depends on various factors including the generation of taxable income during the future periods in which the underlying temporary differences are deductible. We consider the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected earnings, and tax planning strategies in our assessment of positive and negative evidence supporting the likelihood of deferred tax asset realization. We maintain valuation allowances for deferred tax assets until we have sufficient evidence to support the reversal of all or some portion of the allowances.

The undistributed earnings of our foreign subsidiaries are not subject to U.S. federal and state income taxes unless such earnings are distributed in the form of dividends or otherwise to the extent of current and accumulated earnings and profits. The undistributed earnings of foreign subsidiaries are permanently reinvested and totaled $53.6 million and $32.8 million as of March 31, 2026 and 2025, respectively. We made the determination of permanent reinvestment on the basis of sufficient evidence that demonstrates we will invest the undistributed earnings overseas indefinitely for use in working capital, as well as foreign expansion. The determination of the amount of the unrecognized deferred U.S. income tax liability related to the undistributed earnings is not practicable.

Uncertain tax positions as of March 31, are as follows:

(In thousands)	2026			2025		2024
Beginning gross unrecognized tax benefits	$	1,063		$	562	$	575
Decreases related to prior year tax positions		(46	)		—		(575	)
Increases related to current year tax positions		189			235		562
Increases related to prior year tax positions		—			134		—
Increases due to business acquisitions		—			132		—
Decreases related to settlements with tax authorities		(133	)		—		—
Ending gross unrecognized tax benefits	$	1,073		$	1,063	$	562

We recognize interest accrued on any uncertain tax positions as a component of income tax expense. Penalties are recognized as a component of general and administrative expenses. For the year ended March 31, 2025, we accrued interest and penalties of $0.3 million and a corresponding indemnification asset. For the year ended March 31, 2024, we reduced accrued interest and penalties by $0.6 million.

We are consistently subject to tax audits. Due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months that we cannot anticipate.

In the U.S. we file federal and state income tax returns where statutes of limitations generally range from three to five years. Although we have resolved examinations with the IRS through tax year ended March 31, 2010, U.S. federal tax years are open from 2011 forward due to attribute carryforwards. The statute of limitations is open from fiscal year 2021 forward in certain state jurisdictions. We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years. Years beginning after 2019 are open for examination by certain foreign taxing authorities.