Income Taxes

12 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 11 — Income Taxes

The components of income (loss) before income taxes by jurisdiction are as follows:

	Fiscal Years Ended
	March 31,  2023			March 31,  2022			March 31,  2021
	(In thousands)
United States	$	(94,019	)	$	(119,249	)	$	(55,743	)
Foreign		(68,136	)		(18,661	)		(22,457	)
	$	(162,155	)	$	(137,910	)	$	(78,200	)

The benefit from (provision for) income taxes includes the following:

	Fiscal Years Ended
	March 31,  2023			March 31,  2022			March 31,  2021
	(In thousands)
Current tax provision
Federal	$	(11,494	)	$	(7,097	)	$	(8,573	)
State		(5,231	)		(2,041	)		(3,386	)
Foreign		(5,965	)		(4,042	)		449
		(22,690	)		(13,180	)		(11,510	)
Deferred tax benefit
Federal		40,889			39,049			22,837
State		(80,715	)		8,057			(704	)
Foreign		13,098			2,591			571
		(26,728	)		49,697			22,704
Total benefit from (provision for) income taxes	$	(49,418	)	$	36,517		$	11,194

Significant components of the Company’s net deferred tax assets are as follows:

	As of
	March 31,  2023			March 31,  2022
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	71,838		$	251,276
Tax credit carryforwards		115,418			299,165
Capitalized research and development costs		75,152		—
Operating lease liabilities		78,562			93,580
Deferred revenue		24,123			21,546
Other		107,368			99,074
Valuation allowance		(150,047	)		(78,071	)
Total deferred tax assets		322,414			686,570
Deferred tax liabilities:
Intangible assets		(99,629	)		(119,299	)
Property, equipment and satellites		(187,896	)		(163,560	)
Operating lease assets		(68,150	)		(87,677	)
Other		(29,004	)		(28,261	)
Total deferred tax liabilities		(384,679	)		(398,797	)
Net deferred tax assets (liabilities)	$	(62,265	)	$	287,773

A reconciliation of the benefit from (provision for) income taxes to the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes is as follows:

	Fiscal Years Ended
	March 31,  2023			March 31,  2022			March 31,  2021
	(In thousands)
Tax benefit (provision) at federal statutory rate	$	34,047		$	28,964		$	16,422
State tax provision, net of federal benefit		202			1,330			(424	)
Tax credits, net of valuation allowance		22,763			21,647			17,885
Valuation allowance on California R&D tax credits		(72,438	)	—			—
Non-deductible compensation		(3,096	)		(5,771	)		(5,728	)
Non-deductible transaction costs		(167	)		(1,361	)	—
Non-deductible meals and entertainment		(693	)		(311	)		(354	)
Stock-based compensation		(12,032	)		(7,402	)		(9,466	)
Change in state effective tax rate		458			539			(2,360	)
Base Erosion and Anti-Abuse Tax (BEAT)		(8,610	)	—			—
Foreign effective tax rate differential, net of    valuation allowance		(5,769	)		(6,201	)		(3,046	)
Unremitted subsidiary gains		(887	)		(1,565	)		(1,682	)
Change to indefinite reinvestment assertion (EBI)	—				8,071		—
Other		(3,196	)		(1,423	)		(53	)
Total benefit from (provision for) income taxes	$	(49,418	)	$	36,517		$	11,194

As of March 31, 2023, the Company had federal and state research & development (R&D) tax credit carryforwards of $79.9 million and $185.1 million, respectively, which begin to expire in fiscal year 2040 and fiscal year 2025, respectively. As of March 31, 2023, the Company had federal and state net operating loss carryforwards of $118.1 million and $188.2 million, respectively, which begin to expire in fiscal year 2029 and fiscal year 2024, respectively.

Beginning in fiscal year 2023, for federal income tax purposes, the Company is required to capitalize and amortize domestic research and development expenditures over five years and foreign research and development expenditures over 15 years under the Tax Cuts and Jobs Act of 2017, which delays the deductibility of these expenditures. Although Congress may consider legislation that would defer capitalization and amortization requirements to later years, the Company has no assurance that the requirement will be repealed or otherwise modified.

In accordance with the authoritative guidance for income taxes (ASC 740), net deferred tax assets are reduced by a valuation allowance if, based on all the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Future realization of existing deferred tax assets ultimately depends on future profitability and the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under tax law. In the event that the Company’s estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established, which would cause a decrease to income in the period such determination is made. A valuation allowance of $150.0 million at March 31, 2023 and $78.1 million at March 31, 2022 has been established relating to state and foreign net operating loss carryforwards, state R&D tax credit carryforwards, and foreign tax credit carryforwards that, based on management’s estimate of future taxable income attributable to such jurisdictions and generation of additional research credits, are considered more likely than not to expire unused.

In evaluating the Company's ability to realize the deferred tax asset for California R&D tax credits, the Company considered all available positive and negative evidence, including operating results and forecasted ranges of future taxable income, and determined it is more likely than not that a majority of its California R&D tax credits will not be realized due to reduced taxable income apportioned to California in connection with the Link-16 TDL Sale. As a result, during the second quarter of fiscal year 2023, the Company recorded a valuation allowance of $69.0 million. The Company will continue to monitor its business strategies, weighing positive and negative evidence in assessing its realization of this asset in the future. In the event there is a need to release the valuation allowance, a tax benefit will be recorded.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	As of
	March 31,  2023		March 31,  2022		March 31,  2021
	(In thousands)
Balance, beginning of fiscal year	$	112,806	$	92,962	$	80,591
Increase (decrease) related to prior year tax positions		809		7,486		(828	)
Increases related to current year tax positions		16,123		12,358		13,199
Balance, end of fiscal year	$	129,738	$	112,806	$	92,962

Of the total unrecognized tax benefits at March 31, 2023, $105.2 million would reduce the Company’s annual effective tax rate if recognized, subject to valuation allowance consideration. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. As of March 31, 2023 and 2022, the Company has accrued interest and penalties of an insignificant amount and approximately $2.0 million, respectively. The Company recognized a tax benefit of $1.1 million and $1.2 million for reductions of interest and penalties in income tax expense for the fiscal years ended March 31, 2023 and 2022, respectively.

In the next 12 months it is reasonably possible that the amount of unrecognized tax benefits will not change significantly.

The Company is subject to periodic audits by domestic and foreign tax authorities. By statute, the Company’s U.S. federal and state income tax returns are subject to examination by the tax authorities for fiscal years 2020 and thereafter. Additionally, net operating loss and R&D tax credit carryovers that were generated in prior years may also be subject to examination. With few exceptions, fiscal years 2019 and thereafter remain open to examination by foreign tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations.