Income Taxes

9 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 10 — Income Taxes

For the three and nine months ended December 31, 2024, the Company recorded income tax benefits of $11.8 million and $4.7 million, respectively, resulting in effective tax rates of 7% and 2%, respectively. The effective tax rates for the periods differed from the U.S. statutory rate primarily due to a U.S. valuation allowance, foreign tax rate differences, and decreases in the Company's unrecognized tax benefits.

For the three and nine months ended December 31, 2023, the Company recorded income tax benefits of $34.5 million and $128.1 million, respectively, resulting in effective tax rates of 22% and 12%, respectively. The effective tax rate for the three months ended December 31, 2023 did not differ significantly from the U.S. statutory rate despite a valuation allowance recorded against the Company's U.S. net deferred tax assets primarily due to the impacts of purchase price allocation adjustments with respect to the Inmarsat Acquisition recorded in the third quarter of fiscal year 2024. While the effective tax rate for the three months ended December 31, 2023 did not significantly differ from the U.S. statutory rate, the effective tax rate for the nine months ended December 31, 2023 differed from the U.S. statutory rate primarily due to a valuation allowance recorded against the Company's U.S. net deferred tax assets during the second quarter of fiscal year 2024.

During the second quarter of fiscal year 2024, in evaluating the Company’s ability to realize its U.S. net deferred tax assets, the Company considered all available positive and negative evidence, including but not limited to operating results, forecasted ranges of future taxable income, and its recent satellite anomalies. ASC 740 places more weight on the objectively verifiable evidence of current pre-tax losses and recent events than forecasts of future profitability. Therefore, the Company determined it is more likely than not that its U.S. net deferred tax assets will not be realized. As a result, the Company’s tax benefit for the nine months ended December 31, 2023 was reduced by a valuation allowance recorded against its U.S. losses for the periods.

The Company's total valuation allowance increased from $353.6 million at March 31, 2024 to $371.5 million at December 31, 2024 relating to carryforwards for federal, state, and foreign net operating losses, federal and state R&D tax credits, and foreign tax credits.

For the three and nine months ended December 31, 2024, the Company’s gross unrecognized tax benefits decreased by $8.3 million and increased by an insignificant amount, respectively, and interest and penalties decreased by $4.2 million and $3.7 million, respectively. Of the total $185.9 million gross unrecognized tax benefits at December 31, 2024, $12.4 million would reduce the Company's annual effective tax rate if recognized based on the Company's valuation allowance position at December 31, 2024.