Income Taxes

12 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

Provision for income taxes

The components of loss before income taxes are as follows (dollars in thousands):

	Year Ended September 30,
	2024			2023			2022
Domestic	$	(524,632	)	$	(24,524	)	$	(168,452	)
Foreign		(59,978	)		(11,865	)		(30,299	)
Loss before income taxes	$	(584,610	)	$	(36,389	)	$	(198,751	)

The components of provision for income taxes are as follows (dollars in thousands):

	Year Ended September 30,
	2024			2023			2022
Current:
Federal	$	(561	)	$	611		$	12
State		32			38			15
Foreign		8,655			11,619			14,761
Total current	$	8,126		$	12,268		$	14,788
Deferred:
Federal		(4,596	)		7,941			(6,823	)
State		219			(1,164	)		218
Foreign		(281	)		820			103,892
Total deferred		(4,658	)		7,597			97,287
Provision for income taxes	$	3,468		$	19,865		$	112,075
Effective income tax rate		(0.6	)%		(54.6	)%		(56.4	)%

The provision for income taxes differed from the amount computed by applying the federal statutory rate to our loss before income taxes as follows (dollars in thousands):

	Year Ended September 30,
	2024			2023			2022
Federal tax provision at statutory rate	$	(122,768	)	$	(7,633	)	$	(41,738	)
State tax, net of federal benefit		199			(890	)		185
Foreign tax rate and other foreign related tax items		3,230			3,203			920
Uncertain tax positions		1,681			4,202			25
Stock-based compensation		1,953			4,734			(15,020	)
Global intangible low-taxed income		(1,601	)		7,464			(554	)
Goodwill impairment		114,863			—			39,933
Change in valuation allowance		(1,763	)		27,101			128,034
Executive compensation		183			991			885
Non-deductible expenditures		835			211			210
R&D credits		(1,531	)		(588	)		(805	)
Intangible property transfers		—			(18,930	)		—
Capital losses		8,187			—			—
Provision for income taxes	$	3,468		$	19,865		$	112,075

The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of audits or other tax contingencies. Our effective tax rate may be adversely affected by earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated in countries where we have higher statutory tax rates.

Our effective tax rate for the fiscal year 2024 differed from the U.S. federal statutory rate of 21.0%, primarily due to impairment of book goodwill, the tax impacts of stock-based compensation, U.S. inclusions of foreign taxable income, valuation allowance on foreign loss carryforwards, and our composition of jurisdictional earnings.

Our effective tax rate for the fiscal year 2023 differed from the U.S. federal statutory rate of 21.0%, primarily due to the tax impacts of stock-based compensation, U.S. inclusions of foreign taxable income, valuation allowance on foreign loss carryforwards, and our composition of jurisdictional earnings. The intangible property transfers deferred tax benefit was offset by a change in valuation allowance deferred tax expense.

The effective tax rate for the fiscal year 2022 differed from the U.S. federal statutory rate of 21.0%, primarily due to the establishment of a valuation allowance in a foreign jurisdiction as discussed below, impairment of book goodwill, the tax impacts of stock-based compensation, and our composition of jurisdictional earnings.

As of September 30, 2024, we have not provided taxes on undistributed earnings of our foreign subsidiaries, which may be subject to foreign withholding taxes upon repatriation, as we consider these earnings indefinitely reinvested. Our indefinite reinvestment determination is based on the future operational and capital requirements of our domestic and foreign operations. We expect our international cash and cash equivalents and marketable securities will continue to be used for our foreign operations and therefore do not anticipate repatriating these funds. As of September 30, 2024, it is not practical to calculate the unrecognized deferred tax liability on these earnings due to the complexities of the utilization of foreign tax credits and other tax assets.

Deferred tax assets (liabilities) consist of the following as of September 30, 2024 and 2023 (dollars in thousands):

	September 30,
	2024			2023
Deferred tax assets:
Net operating loss carryforwards	$	40,155		$	31,026
Capital loss carryforwards		—			8,187
Federal credit carryforwards		7,380			4,487
Accrued expenses and other reserves		3,119			4,620
Deferred revenue		37,508			52,513
Acquired intangibles		110,844			104,634
Interest limitations carryforward		9,456			10,997
Operating lease liabilities		3,714			4,493
Depreciation		25,394			13,152
Deferred compensation		1,028			1,851
Pension obligation		462			852
Other		3,873			4,148
Total deferred tax assets	$	242,933		$	240,960
Valuation allowance for deferred tax assets		(167,314	)		(162,966	)
Deferred tax assets	$	75,619		$	77,994
Deferred tax liabilities:
Depreciation	$	(5,006	)	$	(5,697	)
Acquired intangibles		(6,889	)		(11,707	)
Convertible debt		—			—
Operating lease right of use assets		(3,557	)		(3,896	)
Deferred costs		(7,691	)		(8,489	)
Other		(1,656	)		(2,166	)
Total deferred tax liabilities		(24,799	)		(31,955	)
Net deferred tax assets	$	50,820		$	46,039

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. We regularly assess the need for a valuation allowance against our deferred tax assets. In evaluating whether it is more likely than not that some or all of our deferred tax assets will not be realized, we consider all available positive and negative evidence. During the third quarter of fiscal year 2022, we established a valuation allowance of $107.6 million against our deferred tax assets in a foreign jurisdiction, which consists of tax amortizable intellectual property and net operating loss carryforwards. We will continue to maintain a valuation allowance against these deferred tax assets until we believe it is more likely than not that they will be realized. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not standard, the valuation allowance would be reversed accordingly in the period that such determination is made. As of September 30, 2024, we have $167.3 million in valuation allowance against our net foreign deferred tax assets. As of September 30, 2023, we have $154.8 million and $8.2 million against our net foreign and domestic deferred tax assets, respectively.

The remaining deferred tax assets after valuation allowances are primarily domestic. Based on the level of historical taxable income and projections for future taxable income over the periods for which these deferred tax assets are deductible, we believe that it is more likely than not that we will realize the benefits of the domestic deductible differences.

As of September 30, 2024, we have immaterial U.S. federal net operating loss (“NOL”) carryforwards, we have state NOL carryforwards of $9.8 million, and foreign NOL carryforwards of $433.6 million, before uncertain tax positions of $270.2 million. As of September 30, 2023, we have immaterial U.S. federal net operating loss (“NOL”) carryforwards, state NOL carryforwards of $8.4 million, and foreign NOL carryforwards of $385.8 million, before uncertain tax positions of $256.0 million. These carryforwards will expire at various dates beginning in 2026 and extending up to an unlimited period. As of September 30, 2024 and 2023, unlimited federal NOLs are immaterial and immaterial, respectively, and unlimited Netherlands NOLs are $360.7 million and $350.5 million, respectively.

As of September 30, 2024, we have U.S. federal research and development carryforwards and foreign tax credit carryforwards of $7.0 million, before uncertain tax positions of $5.2 million, state research and development credits of $0.3 million, and foreign research and development credits of $7.2 million. As of September 30, 2023, we have U.S. federal research and development carryforwards and foreign tax credit carryforwards of $7.6 million, before uncertain tax positions of $7.4 million, state research and development credits of $0.3 million, and foreign research and development credits of $5.5 million. These carryforwards will expire at various dates beginning in 2025 and extending up to 2041.

Uncertain Tax Positions

ASC 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements. We regularly assess the outcome of potential examinations in each of the taxing jurisdictions when determining the adequacy of the amount of unrecognized tax benefit recorded. We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit which is more likely than not to be realized upon ultimate settlement. We recognize interest and penalties related to unrecognized tax positions in our provision for (benefit from) income taxes line of our Consolidated Statements of Operations.

The aggregate changes in the balance of our gross unrecognized tax benefits were as follows (dollars in thousands):

	September 30,
	2024			2023
Balance at the beginning of the year	$	85,172		$	76,590
Beginning balance adjustment		4,018			4,977
Increases related to tax positions taken from prior periods		216			—
Decreases related to tax positions taken from prior periods		(2,272	)		(1,476	)
Increases related to tax positions taken during current period		484			5,382
Decreases for tax settlements and lapse in statutes		(218	)		(301	)
Balance at the end of the year	$	87,400		$	85,172

As of September 30, 2024 and 2023, beginning balance adjustments include cumulative translation adjustments of $4.0 million and $5.0 million, respectively.

As of September 30, 2024, $87.4 million of the unrecognized tax benefits, if recognized, would impact our effective tax rate. We do not expect a significant change in the amount of unrecognized tax benefits within the next 12 months. We recognized interest related to uncertain tax positions in our provision for (benefit from) income taxes of $1.3 million, $0.6 million and ($0.3) million during fiscal years 2024, 2023 and 2022 respectively. We recorded interest of $5.6 million and $4.2 million as of September 30, 2024 and 2023, respectively.

We are subject to U.S. federal income tax, various state and local taxes and international income taxes in numerous jurisdictions. The 2016 through 2023 tax years remain open for all purposes of examination by the IRS and other taxing authorities in material jurisdictions.