Digital Turbine, Inc.APPS

Digital Turbine, Inc. Income Taxes Disclosure

10-KFiled Jun 16, 20254 min read
Income Taxes
The components of the Company’s income tax provision (benefit) attributable to operations are as follows:
Year ended March 31,
202520242023
Current:
U.S. federal$— $— $(38)
State and local— — 637 
Non-U.S.8,241 8,262 10,313 
8,241 8,262 10,912 
Deferred:
U.S. federal(9)5,925 3,026 
State and local— 5,491 (3,430)
Non-U.S.(3,997)(4,361)(5,362)
(4,006)7,055 (5,766)
Income tax provision$4,235 $15,317 $5,146 
(Loss) income before income taxes included (loss) income from domestic operations of $(109,128), $(170,057), and $(6,801) for the years ended March 31, 2025, 2024, and 2023, respectively, and (loss) income from foreign operations of $21,264, $(235,074) and $28,817 for the years ended March 31, 2025, 2024, and 2023, respectively.
A reconciliation of income tax expense using the statutory U.S. income tax rate compared with the actual income tax provision follows:
Year ended March 31,
202520242023
Statutory federal income taxes$(18,518)$(85,077)$4,650 
State income taxes, net of federal benefit(2,591)— 77 
State rate remeasurement523 1,680 (2,992)
Non-deductible expenses— 176 67 
Disallowed executive compensation2,018 1,145 1,070 
Excess deductions for stock compensation1,572 2,783 1,167 
Foreign income inclusion, net— — 3,926 
Foreign rate differential(5,049)(544)(2,682)
Impairment of goodwill— 64,346 — 
Research and development tax credit(1,721)(721)(3,000)
Change in uncertain tax liability364 144 600 
Change in valuation allowance29,551 29,010 6,500 
Return-to-provision adjustments(1,976)2,375 (4,237)
Other miscellaneous62 — — 
Income tax provision$4,235 $15,317 $5,146 

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 expense of $29,551 was realized in the fiscal year ended March 31, 2025, as a result of changes in the valuation allowance. A valuation allowance of $85,403 was recorded against deferred tax assets as of March 31, 2025.
A net tax expense of $29,010 was realized in the fiscal year ended March 31, 2024, as a result of changes in the valuation allowance. A valuation allowance of $55,852 was recorded against deferred tax assets as of March 31, 2024.
Deferred income tax assets and liabilities consist of the following:
Year ended March 31,
202520242023
Deferred income tax assets
Net operating loss carry-forward$90,177 $74,997 $63,660 
Stock-based compensation5,698 6,527 7,009 
Accrued compensation172 219 1,562 
Capitalized research and experimentation expenses3,114 2,311 4,965 
Disallowed Interest
16,434 7,886 1,366 
Gross deferred income tax assets115,595 91,940 78,562 
Valuation allowance(85,403)(55,852)(25,921)
Net deferred income tax assets30,192 36,088 52,641 
Deferred income tax liabilities
Depreciation and amortization(1,310)(1,427)(2,063)
Intangibles and goodwill(45,190)(55,085)(64,518)
Net deferred income tax assets (liabilities)$(16,308)$(20,424)$(13,940)
The following details the scheduled expiration dates of the Company’s net operating loss (NOL) carryforwards:
2026 Through 20352036 Through 2045IndefiniteTotal
U.S. federal NOLs$— $44,812 $77,833 $122,645 
State taxing jurisdictions NOLs12,398 139,393 4,858 156,649 
Non-U.S. NOLs731 2,205 183,385 186,321 
Total, net$13,129 $186,410 $266,076 $465,615 
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 $62,669 of undistributed earnings from foreign subsidiaries as of March 31, 2025. 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, 2025, 2024, and 2023, is as follows:
Year ended March 31,
 202520242023
Balance at April 1$2,168 $2,024 $1,424 
Additions for tax positions of prior years364 144 600 
Reductions for tax positions of prior years— — — 
Balance at March 31$2,532 $2,168 $2,024 
Included in the net deferred income tax assets (liabilities) balances at March 31, 2025, 2024, and 2023, on our consolidated balance sheets are $2,532, $2,168, and $2,024, respectively, of unrecognized tax benefits, which would affect the annual effective tax rate if recognized. The Company recognized $227, $232, and $44 for interest and penalties on uncertain income tax liabilities in income tax expense for the years ended March 31, 2025, 2024, and 2023, 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 2020 through 2025.
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About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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