Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision / (benefit) for income taxes by taxing jurisdiction was as follows:
Year ended March 31,
2022 2021 2020
Current U.S. federal $ 236  $ —  $ — 
Current state and local 703  204  182 
Current non-U.S. 7,439  38  (55)
Total current 8,378  242  127 
Deferred U.S. federal 1,485  (13,185) (7,928)
Deferred state and local (1,350) (204) (2,624)
Deferred non-U.S. (110) 120  50 
Total deferred 25  (13,269) (10,502)
Total income tax provision / (benefit) $ 8,403  $ (13,027) $ (10,375)
Income before income taxes included income from domestic operations of $6,504, $44,800, and $3,800 for the years ended March 31, 2022, 2021, and 2020, respectively, and income / (loss) from foreign operations of $38,171, $(2,800), and $(300) for the years ended March 31, 2022, 2021, and 2020, respectively.
A reconciliation of income tax expense using the statutory U.S. income tax rate compared with the actual income tax provision follows:
Year ended March 31,
2022 2021 2020
Statutory federal income taxes $ 9,256  $ 8,819  $ 741 
State income taxes, net of federal benefit 938  (1,284) 144 
Non-deductible expenses 2,891  926  272 
Change in warrant liability —  —  2,012 
Change in Mobile Posse earn-out —  3,238  — 
Change in Fyber earn-out 10,500  —  — 
Change in AdColony earn-out (1,872) —  — 
Excess deductions for stock compensation (9,946) (16,523) (1,384)
Change in uncertain tax liability 52  591  32 
Change in valuation allowance (1,503) (11,223) (12,262)
Foreign rate differential (1,554) —  — 
Return-to-provision adjustments (454) 2,243  — 
Other miscellaneous 95  186  70 
Income tax provision / (benefit) $ 8,403  $ (13,027) $ (10,375)

The Company’s effective tax rate differs from the U.S. federal statutory tax rate primarily as a result of nondeductible executive compensation and transaction costs, tax deductions in excess of book for stock compensation, nondeductible changes in stock acquisition earn-outs, and state income taxes.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act ("the U.S. Tax Act"). The Global Intangible Low-Taxed Income ("GILTI") provision of the U.S. Tax Act requires the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary's tangible assets. An accounting policy election is available to account for the tax effects of GILTI as either a current period expense when incurred, or to recognize deferred taxes for book and tax basis differences expected to reverse as GILTI in future years. The Company has elected to account for the tax effects of GILTI as a current period expense when incurred.
ASC 740 requires the consideration of a valuation allowance, on a jurisdictional basis, to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. A net tax benefit of $1,503 was realized in the fiscal year ended March 31, 2022, as a result of changes in the valuation allowance. An increase in the valuation allowance of $16,130 was recorded through acquisition accounting related to German deferred tax assets of Fyber that are not considered more likely than not realizable. A valuation allowance of $19,914 is recorded against deferred tax assets as of March 31, 2022, related to non-U.S. locations with a history of losses.
In the year ended March 31, 2020, the Company recorded a net U.S. deferred tax liability of $10,552 on the opening balance sheet related to the Mobile Posse acquisition dated February 28, 2020. The deferred tax liability primarily related to intangible assets recorded at fair market value for financial accounting compared to the carryover of historical tax basis. The acquired deferred tax liabilities represent a source of positive evidence with respect to the Company’s ability to realize deferred tax assets. In accordance with ASC 805-740-30-3, a change in the acquirer’s valuation allowance as a result of a business combination is recorded as a component of income tax expense. As a result of the business combination, the Company released $10,552 of valuation allowance as a component of income tax expense in the year ended March 31, 2020.
Deferred tax assets and liabilities consist of the following:
Year ended March 31,
2022 2021 2020
Deferred income tax assets
Net operating loss carry-forward $ 76,219  $ 25,630  $ 21,913 
Stock-based compensation 3,765  1,675  3,775 
Accrued compensation 3,724  1,968  1,069 
Other 1,700  1,919  1,215 
Gross deferred income tax assets 85,408  31,192  27,972 
Valuation allowance (19,914) (5,287) (15,977)
Net deferred income tax assets 65,494  25,905  11,995 
Deferred income tax liabilities
Depreciation and amortization (5,795) (2,627) (1,648)
Intangibles and goodwill (79,675) (10,315) (10,356)
Net deferred income tax assets / (liabilities) $ (19,976) $ 12,963  $ (9)
Fiscal year 2020 amounts recast for immaterial differences to match reported financial statements.
The following details the scheduled expiration dates of the Company's net operating loss (NOL) carryforwards:
2023 Through 2032 2033 Through 2042 Indefinite Total
U.S. federal NOLs $ —  $ 109,905  $ 71,021  $ 180,926 
State taxing jurisdictions NOLs 5,601  129,890  492  135,983 
Non-U.S. NOLs —  —  108,111  108,111 
Total, net $ 5,601  $ 239,795  $ 179,624  $ 425,020 
The Company’s income is subject to taxation in both the U.S. and foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company establishes liabilities for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities for tax contingencies are established when the Company believes that a tax position is not more likely than not sustainable. The Company adjusts these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.
The Company has not provided for deferred taxes on approximately $24,600 of undistributed earnings from foreign subsidiaries as of March 31, 2022. The Company has not provided for any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax, or foreign exchange gain or loss that would be due when cash is repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes. Because of the various avenues to repatriate the earnings, the determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings, if eventually remitted, is not practicable.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended March 31, 2022, 2021, and 2020, is as follows:
Year ended March 31,
  2022 2021 2020
Balance at April 1 $ 1,372  $ 787  $ 788 
Additions for tax positions of prior years 52  585  — 
Reductions for tax positions of prior years —  —  (1)
Balance at March 31 $ 1,424  $ 1,372  $ 787 
Included in the net deferred income tax assets / (liabilities) balances at March 31, 2022, 2021, and 2020, on our consolidated balance sheets are $1,424, $1,372, and $787, respectively, of unrecognized tax benefits, which would affect the annual effective tax rate if recognized. The Company recognized $59, $23, and $33 for interest and penalties on uncertain income tax liabilities in income tax expense for the years ended March 31, 2022, 2021, and 2020, respectively. The Company does not expect the amount of unrecognized tax benefits to change significantly in the next twelve months.
The Company’s U.S. federal, state, and foreign income tax returns generally remain subject to examination for the tax years ended 2017 through 2022.