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Income Taxes
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income Tax Provision
The components of the loss before income tax expense and noncontrolling interest are as follows:
Year Ended September 30,
202420232022
(in thousands)
Domestic
$(582,333)$(194,639)$(170,570)
Foreign
(30,127)(7,852)(1,708)
Total
$(612,460)$(202,491)$(172,278)
The provision for income taxes consisted of the following components:
Year Ended September 30,
202420232022
(in thousands)
Current:
Federal
$148 $1,074 $— 
State
375 1,710 304 
Foreign
(3,290)— 3,481 
Total current tax
$(2,767)$2,784 $3,785 
Deferred:
Federal
$— $— $— 
State
— — — 
Foreign
— — — 
Total deferred tax
$— $— $— 
Income tax provision$(2,767)$2,784 $3,785 
The following table presents a reconciliation of the tax expense based on the statutory rate to the Company’s actual tax expense in the consolidated statements of operations and comprehensive loss. A notional 21% tax rate was applied as follows:
September 30,
202420232022
U.S. federal statutory income tax21.0 %21.0 %21.0 %
State income taxes, net of federal tax benefit2.6 %0.4 %8.6 %
Tax credits3.0 %6.8 %— %
Permanent and other items2.5 %(4.6)%(1.7)%
Non-deductible compensation(0.9)%(4.6)%— %
Foreign-derived intangible income deduction— %1.2 %— %
Stock compensation(0.7)%(1.1)%(1.7)%
Valuation allowance(27.0)%(20.5)%(28.4)%
Effective income tax rate0.5 %(1.4)%(2.2)%
Deferred Income Taxes
The following table presents the significant components of the Company’s net deferred tax assets and liabilities:
September 30,
20242023
(in thousands)
Deferred tax assets:
Net operating loss carryforwards$102,716 $60,495 
Capitalized research and development156,015 75,208 
Tax credits85,428 66,407 
Deferred revenue81,556 59,441 
Lease liabilities27,999 25,382 
Stock compensation10,989 10,296 
Accrued compensation4,078 3,082 
Intangible assets1,384 1,523 
Other2,843 2,636 
Total gross deferred tax assets$473,008 $304,470 
Valuation allowance$(448,867)$(284,626)
Deferred tax liabilities:
Fixed assets$(13,155)$(9,878)
Right-of-use assets(10,792)(9,966)
Unrealized gains(194)— 
Total gross deferred tax liability$(24,141)$(19,844)
Net deferred tax assets (liabilities)$— $— 
A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2024. Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth. On the basis of this evaluation at September 30, 2024 and 2023, a valuation allowance of $448.9 million and $284.6 million, respectively, has been recorded.
As of September 30, 2024, the Company had accumulated federal, state, and foreign net operating loss (“NOL”) carry forwards of $223.1 million, $693.2 million and $38.3 million, respectively. Of the $223.1 million in federal NOL carryforwards, $23.3 million was generated before January 1, 2018, and is subject to a 20-year carryforward period (“pre-Tax Act losses”), with expiration beginning in 2031. The remaining $199.8 million (“post-Tax Act losses”) can be carried forward indefinitely but is subject to an 80% taxable income limitation. Of the $693.2 million in state NOL carryforwards, $5.4 million can be carried forward indefinitely, while the remaining balance begins to expire in 2031. The Company also has foreign NOL carryforwards totaling $38.3 million, which begin to expire in 2027. Additionally, the Company has federal and state income tax credits of $85.6 million and $20.1 million, respectively. The federal credits begin to expire in 2035. Of the state income tax credits, $11.2 million begins to expire in 2035, while the remaining credits can be carried forward indefinitely.
Pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), the annual use of an entity’s NOL and research and development credit carryforwards may be limited if there is a cumulative ownership change of greater than 50% within a three-year period. The annual limitation is determined based on the entity’s value immediately prior to the ownership change. Future ownership changes could further affect the limitation. If a limitation is applied, the related tax asset would be removed from the deferred tax asset schedule, with a corresponding reduction in the valuation allowance. To date, the Company has completed an analysis pursuant to Sections 382 and 383 through September 30, 2023. Ownership Changes may have occurred since then, and future changes could potentially limit the Company’s ability to utilize these attributes.
Uncertainty in Income Taxes
The Company has adopted guidance issued by the FASB that clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold of more-likely-than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more-likely-than not that a tax position
will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities.
The following table summarizes the Company’s gross unrecognized tax benefits:
Year Ended September 30,
202420232022
(in thousands)
Beginning balance of unrecognized tax benefits$14,536 $3,481 $— 
Gross increase for prior period tax positions654 9,495 3,481 
Gross decrease for prior period tax positions— (1,489)— 
Gross increase for current period tax positions3,415 3,049 — 
Lapse of statue of limitations(1,992)— — 
Ending balance of unrecognized tax benefits$16,613 $14,536 $3,481 
The Company has recorded income tax benefit of $3.3 million for the year ended September 30, 2024, and income tax expense of $0 and $3.5 million for the years ended September 30, 2023 and 2022, respectively, related to uncertain tax positions inclusive of interest and penalties. The Company’s policy is to recognize potential interest and penalties related to unrecognized tax benefits associated with uncertain tax positions, if any, in the income tax provision. As of September 30, 2024, the Company has not accrued any interest or penalties.
If the unrecognized tax benefit as of September 30, 2024 is ultimately recognized, there would be no reduction in the Company’s income tax expense or effective tax rate, excluding the impact of U.S. Tax benefits netted against deferred taxes that are subject to a valuation allowance. The Company does not anticipate any changes in its unrecognized tax benefits over the next 12 months.
The Company is subject to taxation in the U.S. and various states along with other foreign countries. Due to the presence of NOL carryforwards, all of the income tax years remain open for examination domestically. The Company has not been notified that it is under audit by the Internal Revenue Service or foreign taxing authorities; however, the Company has been notified of an income tax examination by the state of California. There are no other audits in any other jurisdictions.
Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to reinvest such earnings indefinitely in active foreign operations. At September 30, 2024, the Company had $0 in unremitted earnings that were permanently reinvested related to its consolidated foreign subsidiaries.
The tax Cuts and Jobs Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5. Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year that the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred.