Income Taxes

12 Months Ended

Mar. 31, 2024

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,  2024			March 31,  2023			March 31,  2022
	(In thousands)
United States	$	(859,006	)	$	(94,019	)	$	(119,249	)
Foreign		(334,940	)		(68,136	)		(18,661	)
	$	(1,193,946	)	$	(162,155	)	$	(137,910	)

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

	Fiscal Years Ended
	March 31,  2024			March 31,  2023			March 31,  2022
	(In thousands)
Current tax provision
Federal	$	(12,128	)	$	(11,494	)	$	(7,097	)
State		(1,010	)		(5,231	)		(2,041	)
Foreign		(27,028	)		(5,965	)		(4,042	)
		(40,166	)		(22,690	)		(13,180	)
Deferred tax benefit
Federal		74,404			40,889			39,049
State		5,166			(80,715	)		8,057
Foreign		100,070			13,098			2,591
		179,640			(26,728	)		49,697
Total (provision for) benefit from income taxes	$	139,474		$	(49,418	)	$	36,517

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

	As of
	March 31,  2024			March 31,  2023
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	198,548		$	71,838
Tax credit carryforwards		141,015			115,418
Capitalized research and development costs		143,581			75,152
Operating lease liabilities		94,360			78,562
Deferred revenue		16,326			24,123
Interest carryforwards		88,269			2,485
Other		184,834			104,883
Valuation allowance		(353,642	)		(150,047	)
Total deferred tax assets		513,291			322,414
Deferred tax liabilities:
Intangible assets		(683,366	)		(99,629	)
Property, equipment and satellites		(725,990	)		(187,896	)
Operating lease assets		(80,258	)		(68,150	)
Other		(88,357	)		(29,004	)
Total deferred tax liabilities		(1,577,971	)		(384,679	)
Net deferred tax assets (liabilities)	$	(1,064,680	)	$	(62,265	)

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,  2024			March 31,  2023			March 31,  2022
	(In thousands)
Tax (provision) benefit at federal statutory rate	$	250,728		$	34,047		$	28,964
State tax provision, net of federal benefit		28,621			202			1,330
Tax credits		28,574			23,925			25,994
Change in federal valuation allowances		(105,968	)	—			—
Change in state valuation allowances		(27,251	)		(73,600	)		(4,347	)
Non-deductible compensation		(5,240	)		(3,096	)		(5,771	)
Non-deductible transaction costs		(18,911	)		(167	)		(1,361	)
Non-deductible meals and entertainment		(1,077	)		(693	)		(311	)
Stock-based compensation		(12,182	)		(12,032	)		(7,402	)
Change in state effective tax rate		292			458			539
Base Erosion and Anti-Abuse Tax (BEAT)	—				(8,610	)	—
Foreign effective tax rate differential, net of    valuation allowance		6,199			(5,769	)		(6,201	)
Unremitted subsidiary gains		(1,586	)		(887	)		(1,565	)
Change to indefinite reinvestment assertion (EBI)	—			—				8,071
Other		(2,725	)		(3,196	)		(1,423	)
Total (provision for) benefit from income taxes	$	139,474		$	(49,418	)	$	36,517

As of March 31, 2024, the Company had federal and state research & development (R&D) tax credit carryforwards of $115.8 million and $191.5 million, respectively, which begin to expire in fiscal year 2040 and fiscal year 2026, respectively. As of March 31, 2024, the Company had federal and state net operating loss carryforwards of $345.8 million and $149.0 million, respectively, which begin to expire in fiscal year 2029 and fiscal year 2025, 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.

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 $353.6 million at March 31, 2024 and $150.0 million at March 31, 2023 has been established relating to federal, state and foreign net operating loss carryforwards, federal and 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. The valuation allowance at March 31, 2024 also includes other federal and state net deferred tax assets for cumulative timing differences.

During the second quarter of fiscal year 2024, in evaluating the Company’s ability to realize its U.S. net deferred tax assets, the Company considered all available positive and negative evidence, including but not limited to operating results, forecasted ranges of future taxable income, and its recent satellite anomalies. ASC 740 places more weight on the objectively verifiable evidence of current pre-tax losses and recent events than forecasts of future profitability. Therefore, the Company determined it is more likely than not that its U.S. net deferred tax assets will not be realized, excluding its deferred tax assets and liabilities related to the separate U.S. tax return filings of Trellisware and the legacy Inmarsat entities. As a result, the Company’s tax benefit for the fiscal year ended March 31, 2024 was reduced by a valuation allowance recorded against such U.S. deferred tax assets.

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. During the second quarter of fiscal year 2023, the Company 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,  2024			March 31,  2023			March 31,  2022
	(In thousands)
Balance, beginning of fiscal year	$	129,738		$	112,806		$	92,962
Increase related to prior year tax positions		2,728			2,549			6,711
Decrease related to prior year tax positions		(190	)		(632	)		(578	)
Increase related to current year tax positions		15,608			16,123			12,358
Increase related to business combinations		54,193		—				2,713
Expiration of the statute of limitations for the assessment of taxes		(16,482	)		(1,108	)		(1,360	)
Balance, end of fiscal year	$	185,595		$	129,738		$	112,806

Of the total unrecognized tax benefits at March 31, 2024, $16.1 million would reduce the Company’s annual effective tax rate if recognized, based on the Company's valuation allowance position at March 31, 2024. It is reasonably possible that there will not be a significant change in uncertain tax balances in the next 12 months.

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, 2024 and 2023, the Company had accrued interest and penalties of approximately $16.9 million and an insignificant amount, respectively. Approximately $19.2 million was recorded through goodwill as part of the purchase accounting for the Inmarsat Acquisition. The Company recognized a tax benefit of $2.0 million, $1.1 million and $1.2 million for reductions of interest and penalties in income tax expense for the fiscal years ended March 31, 2024, 2023 and 2022, respectively.

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 2021 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 2020 and thereafter remain open to examination by foreign tax authorities. Calendar years 2007, 2018 and thereafter remain open in the U.K. for certain entities currently under enquiry. Calendar years 2014 and thereafter remain open in Norway for certain entities currently under enquiry. 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.