15. Income Taxes

The Company adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis beginning with the fiscal year ended June 30, 2026. The following table reconciles the US federal statutory income tax amount and rate to the Company's total global provision for income taxes amount and effective tax rate for the year ended June 30, 2026 (in thousands except for percentages):

Cash taxes paid prior to the adoption of ASU 2023-09 were approximately $3.8 million and $15.4 million in each of the fiscal years ended June 30, 2025 and 2024.

The Company’s global valuation allowance decreased by $12.7 million in the fiscal year ended June 30, 2026 and decreased by $11.1 million in the fiscal year ended June 30, 2025. The Company has provided a full valuation allowance against all of its U.S. federal and state deferred tax assets, as well as valuation allowances against certain non-U.S. deferred tax assets in Brazil. The valuation allowance is determined by assessing both negative and positive available evidence to determine whether it is more likely than not that the deferred tax assets will be recoverable. The Company's inconsistent earnings in recent periods, including historical losses and tax attributes expiring unutilized in recent years provide sufficient negative evidence to require a full valuation allowance against its U.S. federal and state net deferred tax assets. The valuation allowance is evaluated periodically and can be reversed partially or in full if business results and the economic environment have sufficiently improved to support realization of the Company's deferred tax assets. During the fiscal year ended June 30, 2026, the Company’s valuation allowance against its Irish deferred tax assets was released given the available positive evidence including cumulative earnings.

As of June 30, 2026, the Company had net operating loss carry-forwards (“NOLs”) for U.S. federal and state tax purposes of $3.1 million and $121.5 million, respectively. As of June 30, 2026, the Company also had foreign NOLs in Australia, Brazil, Ireland and South Korea of $3.4 million, $13.5 million, $1.5 million and $0.9 million, respectively. As of June 30, 2026, the Company also had federal and state tax credit carry-forwards of $28.8 million and $39.8 million, respectively. The U.S. federal tax credit carry-forwards consist of research and development tax credits of $27.7 million and foreign tax credits of $1.1 million. The state tax credit carryforwards are all research and development related. The $3.1 million U.S. federal NOL carry-forwards are the remaining legacy Aerohive NOLs subject to an annual section 382 limitation, however, they have an indefinite carry-forward life. The state net operating losses of $121.5 million will begin to partially expire in the fiscal year ending June 30, 2026. The foreign net operating losses can generally be carried forward indefinitely. Federal research and development tax credits of $27.7 million will expire beginning in fiscal 2027, if not utilized. North Carolina state research and development tax credits of $0.6 million will expire beginning in the fiscal year ending June 30, 2027, if not utilized. California state research and development tax credits of $39.1 million do not expire and can be carried forward indefinitely.

In June 2025, the Company performed an analysis under Section 382 of the IRC with respect to its net operating loss and credit carry-forwards to determine whether a potential ownership change had occurred that would place a limitation on the annual utilization of these U.S. tax attributes. It was determined that no ownership change had occurred during the fiscal year ended June 30, 2025, however, it is possible a subsequent ownership change could limit the utilization of the Company's tax attributes. The Company also performed, in June 2020, a separate IRC section 382 analysis with respect to the NOLs and tax credits acquired from Aerohive and has determined that while the Company will be subject to an annual limitation, the Company should not be limited on the full utilization of the losses and credits during the statutory allowable carryforward period for the NOLs and credits.

It has been the Company’s historical policy to invest the earnings of certain foreign subsidiaries indefinitely outside the U.S. The Company has reviewed its prior position on the reinvestment of earnings of certain foreign subsidiaries and has recorded a deferred tax liability of $1.2 million related to withholding taxes that may be incurred upon repatriation of earnings from jurisdictions where no indefinite reinvestment assertion is made. The Company continues to maintain an indefinite reinvestment assertion for earnings in certain of its foreign jurisdictions. The unrecorded deferred tax liability for potential taxes associated with repatriation of these earnings is $10.6 million.

On July 4, 2025, federal legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes numerous changes to existing tax law including provisions providing current deductibility of domestic research and development costs, modifications to the limitation on deductibility of business interest expense and modifications to the international tax framework. This legislation has multiple effective dates, with certain provisions effective for the Company's fiscal year ended June 30, 2026 and others for the Company’s fiscal year ending June 30, 2027. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted. Accordingly, the effects of the new legislation are reflected in the consolidated financial statements for the fiscal year ended June 30, 2026.

The Company conducts business globally and as a result, most of its subsidiaries file income tax returns in various domestic and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. Its major tax jurisdictions are the U.S., Ireland, India, California, New Hampshire, Texas and North Carolina. In general, the Company's U.S. federal income tax returns are subject to examination by tax authorities for fiscal years 2020 forward due to net operating losses and the Company's state income tax returns are subject to examination for fiscal years 2004 forward due to net operating losses. Statutes related to material foreign jurisdictions are generally open for fiscal years 2022 forward for Ireland and for tax year ended March 2022 forward for India.

The Company is currently under examination in the U.S. by the Internal Revenue Service for the tax year ended June 30, 2023. Management believes that adequate provision has been made in the financial statements for any potential assessments that may result from tax examinations and other tax-related matters for all open tax years.

The U.S. tax rules require U.S. tax on foreign earnings, known as Global Intangible Low Taxed Income (“GILTI”). Under U.S. Generally Accepted Accounting Principles, taxpayers are allowed to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes. The Company has elected to account for GILTI tax as a component of tax expense in the period in which it is incurred under the period cost method.

As of June 30, 2026, the Company had $18.0 million of unrecognized tax benefits. If fully recognized in the future, $0.2 million would impact the effective tax rate, and $17.8 million would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance.

Estimated interest and penalties related to the underpayment of income taxes, if any are classified as a component of income tax expense in the consolidated statements of operations and totaled less than $0.1 million for each of the fiscal years ended June 30, 2026, 2025 and 2024.