QUANTUM CORP /DE/QMCO
QUANTUM CORP /DE/ Income Taxes Disclosure
NOTE 9: INCOME TAXES
Pre-tax loss reflected in the consolidated statements of operations and comprehensive loss for the years ended March 31, 2026 and 2025 is as follows (in thousands):
| Year Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| U.S. | $ | (98,392) | $ | (112,416) | |||||||
| Foreign | (1,646) | (1,854) | |||||||||
| Total | $ | (100,038) | $ | (114,270) | |||||||
Income tax provision consists of the following (in thousands):
| Year Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Current tax expense | |||||||||||
| Federal | $ | — | $ | — | |||||||
| State | 19 | 36 | |||||||||
| Foreign | 1,312 | 741 | |||||||||
| Total current tax expense | 1,331 | 777 | |||||||||
| Deferred tax expense (benefit) | |||||||||||
| Federal | 19 | 20 | |||||||||
| State | 7 | 37 | |||||||||
| Foreign | (349) | (13) | |||||||||
| Total deferred tax expense (benefit) | (323) | 44 | |||||||||
| Income tax provision | $ | 1,008 | $ | 821 | |||||||
Income taxes paid, net of refunds received (in thousands):
| For the year ended March 31, | |||||
| 2026 | |||||
| Federal | $ | — | |||
| State | (52) | ||||
| Foreign | |||||
| Belgium | 116 | ||||
| France | 77 | ||||
| India | 149 | ||||
| Israel | 449 | ||||
| Italy | 93 | ||||
| Malaysia | 79 | ||||
| Mexico | 80 | ||||
| United Kingdom | 103 | ||||
| Other Foreign Jurisdictions | 100 | ||||
| Total Foreign | 1,246 | ||||
| Total Income Taxes paid, net of refunds received | $ | 1,194 | |||
Beginning with 2026 annual reporting, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, prospectively as described in Note 9. In FY26, state and local income taxes in California, South Carolina, Minnesota, and New Jersey comprise the majority of the state and local income taxes, net of federal effect category.
A reconciliation of the federal statutory income tax rate of 21% to the effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended March 31, 2026 was as follows (in thousands, except percentages):
| For the year ended March 31, | |||||||||||
| 2026 | |||||||||||
| At Statutory Rate | $ | (21,008) | 21.0 | % | |||||||
| State Income Taxes, net of Federal Effect | 1,733 | (1.7) | % | ||||||||
| Change in Valuation Allowance | (7,131) | 7.1 | % | ||||||||
| Nontaxable or Nondeductible Items | |||||||||||
| Loss on Debt Extinguishment | 12,526 | (12.5) | % | ||||||||
| Warrants Mark-to-Market | (2,376) | 2.4 | % | ||||||||
| Legal Services | 2,368 | (2.4) | % | ||||||||
| Other Nondeductible Items | 1,477 | (1.5) | % | ||||||||
| Changes in Tax Laws or Rates | — | — | % | ||||||||
| Tax Credits | |||||||||||
| R&D Credits | 4,614 | (4.6) | % | ||||||||
| Foreign Tax Credit | 11,915 | (11.9) | % | ||||||||
| Cross-Border Tax Laws | |||||||||||
| Subpart F Inclusion | 281 | (0.3) | % | ||||||||
| Worldwide Changes in UTB | (4,683) | 4.7 | % | ||||||||
| Other | 519 | (0.5) | % | ||||||||
| Foreign Tax Effects | |||||||||||
| Other Foreign Jurisdictions | 773 | (0.8) | % | ||||||||
| Total Tax Expense | $ | 1,008 | (1.0) | % | |||||||
The income tax provision differs from the amount computed by applying the federal statutory rate of 21% to loss before income taxes as follows (in thousands):
| For the year ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Expense (benefit) at the federal statutory rate | $ | (21,008) | 21.0 | % | $ | (24,122) | 21.1 | % | |||||||||||||||
| Equity compensation | 188 | (0.2) | % | 580 | (0.5) | % | |||||||||||||||||
| Permanent items | 17,351 | (17.3) | % | 309 | (0.3) | % | |||||||||||||||||
| Foreign taxes | 1,135 | (1.1) | % | 299 | (0.3) | % | |||||||||||||||||
| State income taxes | 1,733 | (1.7) | % | 36 | — | % | |||||||||||||||||
| Valuation allowance | (7,152) | 7.1 | % | 13,907 | (12.2) | % | |||||||||||||||||
| Uncertain tax positions | (4,722) | 4.7 | % | (6,672) | 5.8 | % | |||||||||||||||||
| Expiration of attributes | 16,963 | (17.0) | % | 8,427 | (7.4) | % | |||||||||||||||||
| Research and development credits | (367) | 0.4 | % | (844) | 0.7 | % | |||||||||||||||||
| Warrant fair value adjustments | (2,376) | 2.4 | % | 9,507 | (8.3) | % | |||||||||||||||||
| Other | (737) | 0.8 | % | (606) | 0.5 | % | |||||||||||||||||
| Income tax provision | $ | 1,008 | (1.0) | % | $ | 821 | (0.7) | % | |||||||||||||||
Significant components of deferred tax assets and liabilities are as follows (in thousands):
| As of March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Deferred tax assets | |||||||||||
| Loss carryforwards | $ | 71,533 | $ | 61,466 | |||||||
| Deferred revenue | 23,865 | 25,895 | |||||||||
| Capitalized research and development | 23,094 | 28,824 | |||||||||
| Tax credits | 2,817 | 15,517 | |||||||||
| Disallowed interest | 22,890 | 19,696 | |||||||||
| Other accruals and reserves not currently deductible for tax purposes | 3,651 | 3,913 | |||||||||
| Lease obligations | 1,853 | 2,016 | |||||||||
| Inventory | 4,537 | 3,779 | |||||||||
| Acquired intangibles | 989 | 1,285 | |||||||||
| Accrued warranty expense | 178 | 277 | |||||||||
| Depreciation | 1,491 | 1,755 | |||||||||
| Gross deferred tax assets | 156,898 | 164,423 | |||||||||
| Valuation allowance | (154,616) | (161,730) | |||||||||
| Total deferred tax assets, net of valuation allowance | 2,282 | 2,693 | |||||||||
| Deferred tax liabilities | |||||||||||
| Lease assets | (1,529) | (1,711) | |||||||||
| Other | 290 | (323) | |||||||||
| Total deferred tax liabilities | (1,239) | (2,034) | |||||||||
| Net deferred tax assets (liabilities) | $ | 1,043 | $ | 659 | |||||||
The valuation allowance increased by $6.9 million during the year ended March 31, 2026 and increased by $14.1 million during the year ended March 31, 2025, respectively.
A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):
| For the year ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Beginning Balance | $ | 81,678 | $ | 88,341 | |||||||
| Increase in balances related to tax positions in current period | 1,050 | 1,558 | |||||||||
| Increase (decrease) in balances related to tax positions in prior period | 40 | (12) | |||||||||
| Decrease in balances due to lapse in statute of limitations | (6,179) | (8,209) | |||||||||
| Ending balance | $ | 76,589 | $ | 81,678 | |||||||
During fiscal 2026, excluding interest and penalties, there was a $(5.1) million change in the Company's unrecognized tax benefits. Including interest and penalties, the total unrecognized tax benefit at March 31, 2026 was $77.8 million, of which $68.8 million, if recognized, would favorably affect the effective tax rate. At March 31, 2026, accrued interest and penalties totaled $1.2 million. The Company's practice is to recognize interest and penalties related to income tax matters in the income tax provision in the consolidated statements of operations and comprehensive loss. As of March 31, 2026, $70.9 million of unrecognized tax benefits were recorded as a contra deferred tax asset in other long-term assets in the consolidated balance sheets and $6.9 million (including interest and penalties) were included in other long-term liabilities in the consolidated balance sheets.
The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. The Company's U.S. tax returns have been audited for years through 2002 by the Internal Revenue Service. In other major
jurisdictions, the Company is generally open to examination for the most recent three to five fiscal years. During the next 12 months, it is reasonably possible that approximately $2.6 million of tax benefits, inclusive of interest and penalties, that are currently unrecognized could be recognized as a result of the expiration of applicable statutes of limitations. Upon recognition of the tax benefit related to the expiring statutes of limitation, $1.7 million will be offset by the establishment of a related valuation allowance. The net tax benefit recognized in the consolidated statements of operations and comprehensive loss is estimated to be $0.9 million.
As of March 31, 2026, the Company had federal net operating loss and tax credit carryforwards of approximately $324.8 million and $26.7 million, respectively. The net operating loss and tax credit carryforwards expire in varying amounts in fiscal 2026 if not previously utilized, and $151.5 million are indefinite-lived net operating loss carryforwards. These carryforwards include $5.3 million of acquired net operating losses, the utilization of which is subject to various limitations due to prior changes in ownership.
Certain changes in stock ownership could result in a limitation on the amount of both acquired and self-generated net operating loss and tax credit carryovers that can be utilized each year. If the Company has previously undergone, or should it experience in the future, such a change in stock ownership, it could severely limit the usage of these carryover tax attributes against future income, resulting in additional tax charges.
Due to its history of net losses and the difficulty in predicting future results, Quantum believes that it cannot rely on projections of future taxable income to realize the deferred tax assets. Accordingly, it has established a full valuation allowance against its U.S. and certain foreign net deferred tax assets. Significant management judgment is required in determining the Company's deferred tax assets and liabilities and valuation allowances for purposes of assessing its ability to realize any future benefit from its net deferred tax assets. The Company intends to maintain this valuation allowance until sufficient positive evidence exists to support the reversal of the valuation allowance. The Company's income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, its valuation allowance.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Jun 25, 2026 | Showing above |
| 2025 | Aug 26, 2025 | |
| 2024 | Jun 28, 2024 | |
| 2023 | Jun 6, 2023 | |
| 2022 | Jun 8, 2022 | |
| 2021 | May 26, 2021 | |
| 2020 | Jun 24, 2020 | |
| 2019 | Aug 6, 2019 | |
| 2017 | Jun 1, 2017 | |
| 2016 | Jun 3, 2016 | |
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.