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Income Taxes
 12 Months Ended
Mar. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the Company’s loss before income taxes are summarized as follows:
Year Ended March 31,
202420232022
(in thousands)
Domestic$(663,740)$(292,730)$(221,212)
Foreign(2,891)(21,698)242 
Loss before income taxes$(666,631)$(314,428)$(220,970)
There has historically been no federal provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. In the fiscal year ended March 31, 2024 the Company had an immaterial income tax provision. During the fiscal year ended March 31, 2023, the Company recognized a deferred foreign income tax benefit of $2.8 million related to the reversal of a deferred tax liability related to U.K. intangibles acquired in the Lemonaid Acquisition. During the fiscal year ended March 31, 2022, the Company recognized a deferred income tax benefit of $3.5 million related to the partial release of the valuation allowance for deferred tax assets due to the recognition of deferred tax liabilities in connection with the Lemonaid Acquisition.
A reconciliation of income tax (benefit) computed at the statutory federal tax rate to the effective income tax rate is summarized as follows:
Year Ended March 31,
202420232022
Statutory federal tax expense rate21 %21 %21 %
Non-deductible stock-based compensation(3 %)(4 %)(3 %)
Fair Market Value adjustment on Warrants— %— 3 %
Change in valuation allowance related to acquisition— %— 2 %
Goodwill impairment(11 %)— %— %
Change in valuation allowance(6 %)(16 %)(20 %)
Other(1 %)— (2 %)
Effective tax rate— %1 %2 %
Deferred income taxes result from differences in the recognition of revenue and expenses for tax and financial reporting purposes, as well as operating loss and tax credit carryforwards. The components of the Company's deferred tax assets and liabilities as of March 31, 2024 and 2023 were as follows:
March 31,
20242023
(in thousands)
Deferred tax assets:
Net operating loss carryforwards$280,549 $262,295 
Capitalized research and development expenses48,027 33,709 
Accruals and reserves4,237 3,865 
Stock-based compensation13,397 18,065 
Deferred revenue17,570 11,498 
Operating lease liabilities17,966 21,474 
Property and equipment1,192 — 
Capital loss carryover5,109 — 
Other303 332 
Gross deferred tax assets388,350 351,238 
Valuation allowance(364,871)(322,104)
Total deferred tax assets23,479 29,134 
Deferred tax liabilities:
Prepaid expenses(783)(892)
Intangibles(11,215)(13,689)
Operating lease right-of-use assets(11,481)(14,117)
Property and equipment— (436)
Gross deferred tax liabilities(23,479)(29,134)
Net deferred taxes$— $— 
The Company maintains a full valuation allowance on the remaining net deferred tax assets of the U.S. entity as it is more likely than not that the Company will not realize the deferred tax assets. Utilization of net operating loss carryforwards may be subject to future annual limitations provided by Section 382 of the Code and similar state provisions.
As of March 31, 2024, the Company had $1.1 billion of federal and $693.7 million of state net operating loss carryforwards available to reduce future taxable income, which will begin to expire in 2026 for federal and state tax purposes. Included in the $1.1 billion carryover losses is $779.7 million of net operating losses with an indefinite life. The Company does not have any federal and state research and development tax credit carryforwards. As of March 31, 2024,
the Company has $21.8 million capital loss carryforward that will begin to expire in 2029. The change in the valuation allowance in the current year was an increase of $42.8 million primarily related to the increase of current year losses.
The Tax Reform Act of 1986 and similar California legislation impose substantial limitations on the utilization of net operating loss and tax credit carryforwards, if there is a change in ownership as provided by Section 382 of the Internal Revenue Code and similar state provisions. Such a limitation could result in the expiration of the net operating loss carryforwards and tax credits before utilization. We completed a Section 382 study through March 31, 2023 which did not identify any ownership changes which would limit our ability to utilize net operating losses or tax attributes prior to expiration. Further ownership changes subsequent to March 31, 2023 may be identified which could result in limitations to the amount of net operating losses and tax attributes which may be utilized prior to expiration.
Significant management judgment is required in determining the provision for income taxes and, in particular, any valuation allowance recorded against the Company’s deferred tax assets. The Company determined that, due to the Company’s cumulative tax loss history and the difficulty in forecasting the timing of future revenue, it was necessary to maintain a valuation allowance to the full amount of the deferred tax asset. The Company determined that it was not more-likely-than-not that the deferred tax asset would be utilized.
The Company had no unrecognized tax benefits for the fiscal years ended March 31, 2024, 2023 and 2022.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the fiscal years ended March 31, 2024, 2023 and 2022, the Company recognized no interest and penalties associated with the unrecognized tax benefits. There are no tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. If recognized, there would be no impact on the Company’s effective tax rate due to its valuation allowance.
The Company files income tax returns in the U.S. federal jurisdiction, various states, and the U.K. The Company is not currently under examination by income tax authorities in federal, state, or other jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits.
In 2021, the Organization for Economic Cooperation and Development developed guidance on Base Erosion and Profit Sharing Pillar Two Model Rules (“Pillar Two”), which addresses corporate tax planning strategies used by some large multinational corporations to shift profits from higher-tax jurisdictions to lower-tax jurisdictions or zero-tax locations. This guidance imposes a 15% minimum tax on the earnings of large multinational corporations. The Company does not currently operate in any jurisdictions in which Pillar Two is expected to be effective in 2024. The Company does not expect these rules to have a significant impact on its effective tax rate or its consolidated financial statements.