v3.26.1
Taxes on Income (Loss)
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Taxes on Income (Loss)
12. Taxes on Income (Loss)
Income (loss) before taxes on income that resulted from domestic and foreign operations is as follows:
Year Ended March 31,
202620252024
Domestic operations$27,922 $(12,053)$(186,045)
Foreign operations15,866 22,695 18,320 
Total income (loss) before taxes
$43,788 $10,642 $(167,725)
The provision (benefit) for taxes on income consisted of the following:
Year Ended March 31,
202620252024
Federal:
Current$(1,868)$72,767 $36,679 
Deferred(297)131 (29,318)
Total federal(2,165)72,898 7,361 
State and local:
Current4,770 15,450 14,342 
Deferred850 (567)(1,818)
Total state and local5,620 14,883 12,524 
Foreign:
Current6,621 9,734 4,717 
Deferred(1,608)(1,034)692 
Total foreign5,013 8,700 5,409 
Total provision (benefit) for taxes
$8,468 $96,481 $25,294 
We adopted ASU 2023-09, “Income Taxes: ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” on a prospective basis beginning with the fiscal year ended March 31, 2026, as described in Note 1, “Description of Business, Basis of Preparation and Summary of Significant Accounting Policies—Recently Adopted Accounting Standards.” Pursuant to the disclosure requirements of ASU 2023-09, a reconciliation of the U.S. federal statutory tax rate to the Company's effective income tax rate for the fiscal year ended March 31, 2026 is as follows:
Year Ended March 31, 2026
Amount
Percent
U.S. federal statutory income tax rate$9,196 21.0 %
State and local income taxes, net of federal income tax effect (1)
4,562 10.4 
Foreign tax effects:
United Kingdom
Withholding taxes1,020 2.3 
Valuation allowance1,515 3.5 
    Other122 0.3 
Australia
Valuation Allowances(2,352)(5.4)
Other52 0.1 
Singapore
Non-taxable interest income(1,023)(2.3)
Other387 0.9 
Mexico
      Valuation Allowance(615)(1.4)
      Other424 1.0 
Foreign withholding taxes947 2.2 
Other foreign jurisdictions(125)(0.3)
Effects of changes in tax laws or rates enacted in the period— — 
Effect of cross-border tax laws(93)(0.2)
Tax credits:
Research and development tax credits(8,727)(19.9)
Investment energy tax credits(2,647)(6.0)
Other (224)(0.5)
Changes in valuation allowance(5,551)(12.7)
Nontaxable or nondeductible items:
Goodwill impairment7,350 16.8 
Compensation with Sec 162(m) limitation2,999 6.8 
Meals and Entertainment597 1.4 
    Other (398)(1.1)
Changes in unrecognized tax benefits1,877 4.3 
Other adjustments
Deferred tax adjustments(825)(1.9)
Effective income tax rate
$8,468 19.3 %
________
(1)State and local income taxes in Texas, California, and Florida make up more than 50% of the tax effect of this category.
A reconciliation of the U.S. federal statutory tax rate to the Company's effective income tax rate for fiscal years prior to the adoption of ASU 2023-09 is as follows:
Year Ended March 31,
20252024
U.S. federal statutory income tax rate21.0 %21.0 %
Effect of state and local income taxes111.3 (6.1)
Foreign rate differential(2.6)0.7 
Foreign withholding and branch taxes20.9 1.1 
Research and development credit4.5 1.6 
U.S. tax cost of foreign earnings— (0.1)
Unrecognized tax benefit5.6 (1.5)
Valuation allowance on deferred tax assets734.8 (25.0)
Foreign exchange gain or loss(2.5)(1.1)
Nontaxable or nondeductible interest— 0.7 
Goodwill impairment— (5.1)
Other, net13.6 (1.3)
Effective income tax rate
906.6 %(15.1)%
The principal temporary differences between accounting for income and expenses for financial reporting and income tax purposes as of March 31, 2026 and 2025 are as follows:
March 31,
20262025
Deferred tax assets:
Inventory and product development costs$28,392 $30,971 
Capitalized software development 22,066 71,285 
Employee compensation13,089 5,602 
Deferred revenue265,611 250,721 
Operating lease liability15,932 17,805 
Loss and credit carryforwards32,220 32,168 
Interest expense carryforward92,381 120,133 
Accrued expenses13,174 16,569 
Other5 — 
Total deferred tax assets
482,870 545,254 
Deferred tax liabilities:
Intangible and fixed assets(154,205)(201,252)
Deferred royalties, commissions(41,724)(45,232)
Deferred financing costs(7,105)(14,855)
Operating lease right-of-use asset(10,691)(12,018)
Indefinite-lived intangibles and goodwill(112,873)(110,197)
Other— (1,239)
Total deferred tax liabilities
(326,598)(384,793)
Net deferred income tax asset (liability) before valuation allowance156,272 160,461 
Valuation allowance(162,914)(168,134)
Net deferred income tax asset (liability)
$(6,642)$(7,673)
Reported as:
Non-current deferred tax assets$8,572 $7,983 
Non-current deferred tax liabilities(15,214)(15,656)
Net deferred income tax asset (liability)
$(6,642)$(7,673)
The Company records valuation allowances against deferred income tax assets when the Company determines that it is more likely than not based upon all relevant evidence that such deferred income tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future income will be available to use the existing deferred tax assets. Realization of deferred tax assets is based, in part, on the Company's judgment and various factors including the projected reversal of deferred tax liabilities, the Company's ability to generate future taxable income in jurisdictions where such assets have arisen and potential tax planning strategies. Valuation allowances are recorded in order to reduce the deferred tax assets to the amount reasonably expected to be realized in the future.
For the fiscal years ended March 31, 2026 and 2025, a valuation allowance of $138,011 and $143,355, respectively, is recorded on the Company’s net federal and state deferred tax assets due to the preponderance of negative evidence consisting of cumulative book losses and the Company’s analyses which indicates that the reversal of existing temporary differences and carryforwards will not be sufficient
to support the realizability of all net domestic deferred tax assets, mainly driven by disallowed interest expense under Code Section 163(j) – Limitation on Business Interest Expense Deduction.
As of March 31, 2026 and 2025, a valuation allowance of $24,903 and $24,779, respectively, has been recorded for select international deferred tax assets due to a preponderance of negative evidence, primarily of cumulative book losses. The Company will continue to assess the available positive and negative evidence to estimate if sufficient future taxable income will be available to realize the existing deferred tax assets. As a result, the amount of the deferred tax assets considered realizable could be adjusted if estimates of future taxable income improve or objective negative evidence in the form of the level of cumulative book losses is reduced.
As of March 31, 2026, the Company has state net operating loss carryforwards of $56,443, of which $45,890 will be subject to expiration between 2027 and 2044. The Company's foreign net operating loss carryforwards as of March 31, 2026 are $68,650, mainly in the United Kingdom which are not subject to expiration.
U.S. income and foreign withholding taxes have not been recorded on temporary differences related to investments in certain foreign subsidiaries as such differences are considered indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability with respect to such investments is not practicable.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. OBBBA made changes to the Internal Revenue Code (“IRC”) including, but not limited to (i) allowing taxpayers to fully deduct domestic research and software development expenditures, providing a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic research expenditures, (ii) restoring Adjusted Taxable Income by adding back amortization and depreciation to calculate the limitation on interest deductions (effectively returning to EBITDA), and (iii) providing a permanent provision for 100% bonus depreciation deductions for most tangible personal property.
The Company evaluated OBBBA and reflected the tax effects in the period of enactment. The acceleration of deductibility of software development, interest, and tangible personal property expenditures reduced our domestic current income tax provision and deferred tax assets for fiscal year ending March 31, 2026.
On May 16, 2025, the Company purchased IRC Section 48 United States tax credits with a notional value of $52,900 from a third party for cash consideration of $50,299. The Company used substantially all the purchased tax credits to offset a portion of its federal income tax liability for the fiscal year ended March 31, 2025. The full amount of the cash consideration paid has been included within “Cash paid for income taxes” in the supplemental disclosures to the consolidated statements of cash flows. The difference between the notional value of the tax credits purchased and the cash consideration paid has been reflected as a component of the Company’s income tax provision (benefit) in the consolidated statements of operations.
Cash paid for income taxes, net of refunds, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended March 31, 2026 is as follows:
Year Ended March 31, 2026
Federal$56,296 
State13,019 
Foreign7,267 
Cash paid for income taxes, net of refunds$76,582 
For the fiscal year ended March 31, 2026, no U.S. State or foreign jurisdiction comprised 5% or more of the total cash paid for income taxes, net of refunds.
Cash paid for income taxes, net of refunds, prior to the adoption of ASU 2023-09 was $46,920 and $43,781 for the fiscal years ended March 31, 2025 and 2024, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Year Ended March 31,
202620252024
Balance at the beginning of the period$12,216 $8,116 $9,816 
Additions based on tax positions related to the current year845 4,100 2,757 
Additions for tax positions of prior years— — 305 
Reduction for tax positions of prior year(357)— (4,762)
Balance at the end of the period
$12,704 $12,216 $8,116 
As of March 31, 2026 and 2025, there are $9,284 and $7,117, respectively, of unrecognized tax benefits, including interest and penalties, that if recognized would affect the annual effective tax rate. Total uncertain tax liabilities, including interest and penalties, as of March 31, 2026 are $16,899, of which $4,357 is included in deferred income taxes as non-current and $12,542 is included within Other non-current liabilities within the consolidated balance sheets. Total uncertain tax liabilities, including interest and penalties, as of March 31, 2025 are $16,049, of which $4,898 is included in deferred income taxes as non-current and $11,151 is included within Other non-current liabilities within the consolidated balance sheets.
For the fiscal years ended March 31, 2026, 2025 and 2024, the Company recognized interest and penalties for uncertain tax positions of $1,831, $929 and $336 respectively.
The Company entered into the Compliance Assurance Process ("CAP"), a voluntary Internal Revenue Service ("IRS") program for the tax years ending March 31, 2026 and March 31, 2027, in which tax positions are identified, examined and resolved prior to filing the Company's federal income tax return. While the federal statute of limitations remains open for tax years ending on or after March 31, 2023, the IRS will perform a risk assessment of unexamined open years, which may or may not result in examination. The Company may withdraw from CAP at any time. As of March 31, 2026, the Company’s tax years that remain open and subject to examination by most tax jurisdictions generally include tax years ending after March 31, 2022, for U.S., state and local jurisdictions, and on or after March 31, 2020, for foreign jurisdictions.
The Company believes that its accrual for tax liabilities is adequate for all open audit years based on an assessment of past experience and interpretation of tax laws. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. Until formal resolutions are reached with tax authorities, the determination of a possible audit settlement range with respect to the impact on unrecognized tax benefits is not practicable. On the basis of present information, it is the Company's opinion that any assessments resulting from the current audits will not have a material adverse effect on the Company's financial statements.
Although the timing of income tax audit resolution and negotiations with taxing authorities is highly uncertain, the Company does not anticipate a significant change to the total amount of unrecognized income tax benefits as a result of audit developments within the next twelve months.