INCOME TAXES

3 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company computes its interim period income tax expense or benefit using a forecasted estimated annual effective tax rate ("EAETR") and adjusts for any discrete items arising during the interim period and any changes in the Company's projected full-year business interest expense and taxable income. For the three months ended September 30, 2024, the EAETR was 5.1% and was based primarily on minimum state tax obligations.

For the three months ended September 30, 2024 and 2023, the Company recorded an income tax provision of $0.2 million and $0.1 million, respectively. The income tax provisions for both quarters primarily relate to state income and deferred taxes related to goodwill amortization for tax purposes. The provision was based upon actual income before income taxes for the three months ended September 30, 2024, as this provides a more reliable estimate of the income tax provision than an estimated annual effective income tax rate. The Company had a total unrecognized income tax benefit of $0.7 million and $0.7 million as of September 30, 2024 and 2023, respectively.

The Company has significant deferred tax assets, a substantial amount of which result from operating loss carryforwards. The Company routinely evaluates its ability to realize the benefits of these assets to determine whether it is more likely than not that

such benefit will be realized. The Company believes that for the year ended September 30, 2024, it is more likely than not that its deferred tax assets will not be realized. Accordingly, the Company has established a full valuation allowance on its net deferred tax assets. The Company intends to continue maintaining a full valuation allowance on its federal and state deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. However, given the Company’s current earnings and anticipated future earnings, the Company believes that there is a reasonable possibility in a future period that sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to actually achieve.