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Income Taxes
 12 Months Ended
Jan. 26, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company's regional income before income taxes and equity in net gains (losses) of equity method investments was as follows:
Fiscal Year Ended
(in thousands)January 26, 2025January 28, 2024January 29, 2023
Domestic$(183,751)$(306,039)$(59,961)
Foreign390 (735,516)138,428 
Total$(183,361)$(1,041,555)$78,467 
The provision for income taxes consisted of the following:
Fiscal Year Ended
(in thousands)January 26, 2025January 28, 2024January 29, 2023
Current income tax (benefit) provision   
Federal$(10,416)$1,758  $8,291 
State1,513 1  17 
Foreign9,949 8,750  24,231 
Subtotal1,046 10,509  32,539 
Deferred income tax (benefit) provision    
Federal— 50,938  (23,730)
State— 51  (28)
Foreign(23,058)(10,979) 8,563 
Subtotal(23,058)40,010  (15,195)
Provision for income taxes$(22,012)$50,519  $17,344 
The provision for income taxes reconciles to the amount computed by applying the statutory federal rate to income before taxes as follows:
Fiscal Year Ended
(in thousands)January 26, 2025January 28, 2024January 29, 2023
Federal income tax at statutory rate$(38,506)  $(218,726) $16,478 
State income taxes, net of federal benefit1,173   (9,989) (4,134)
Foreign taxes differential, including withholding taxes(1,027)(36,408) (11,636)
Tax credits generated(9,436)  (6,054) (6,922)
Changes in valuation allowance23,847   149,209  6,500 
Gain on intra-entity asset transfer of intangible assets11,430 — (8,735)
Changes in uncertain tax positions(9,856)  1,877  826 
True-up on impairment losses(26,903)  —  — 
Equity compensation1,825   2,929  430 
Nondeductible loss on debt extinguishment30,384   —  — 
Rate change on deferreds(10,382)  (2,667) — 
GILTI and Subpart F income7,227   —  7,385 
Transaction costs— — 13,729 
Goodwill impairment2,019 193,699 — 
Nondeductible officers compensation1,650 741 1,326 
Other(5,457)  (24,092) 2,097 
Provision for income taxes$(22,012)  $50,519  $17,344 
The Company’s tax expense benefited from its operations in lower tax jurisdictions, such as Switzerland, research tax credits, changes in uncertain tax positions, an impairment loss on Swiss investments and the impact of a change in tax rates on deferred
tax assets. The Company's tax expense increased due to a change in valuation allowance, nondeductible loss on extinguishment of debt and taxes related to a gain associated with an intra-entity asset transfer.
Historically, the Company benefited from a Swiss tax holiday that commenced on January 30, 2017. However, Switzerland implemented the OECD Pillar Two rules effective from January 1, 2024. These rules, guided by OECD administrative updates in December 2023, impose a global minimum tax of 15% on multination enterprises with an annual revenue exceeding €750 million in at least two out of the last four years. As of the fourth quarter of fiscal year 2025, the Company reached this threshold and does not benefit from the tax holiday from fiscal year 2025 onwards. The Company recorded the impact as part of our provision for income taxes.
The Creating Helpful Incentives to Produce Semiconductors and Science Act ("CHIPS Act") provides for various incentives and tax credits, including the Advanced Manufacturing Investment Credit ("AMIC"), which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022. At least a portion of our current and future capital expenditures and research and development costs are expected to qualify for this credit, which benefits us by allowing us to net the credit received against our costs. The AMIC credit is accounted for outside of ASC 740 as a reduction to the depreciable basis of the assets used in operations and will not have an impact on our effective tax rate.
The Tax Act imposed a U.S. tax on GILTI income that is earned by certain foreign affiliates owned by a U.S. stockholder. In accordance with guidance issued by the FASB, the Company has made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred.
Prior to the enactment of the Tax Act, with few exceptions, U.S. federal income and foreign withholding taxes had not been provided on the excess of the amount for financial reporting over the tax basis of investments in the Company’s foreign subsidiaries that were essentially permanent in duration. With the enactment of the Tax Act, all historic and current foreign earnings are taxed in the U.S. Depending on the jurisdiction, these foreign earnings are potentially subject to a withholding tax, if repatriated. As of January 26, 2025, the historical undistributed earnings of the Company’s foreign subsidiaries are intended to be permanently reinvested outside of the U.S.
Notwithstanding the U.S. taxation of these amounts, the Company has determined that none of its current foreign earnings will be permanently reinvested. If the Company needed to remit all or a portion of its historical undistributed earnings to the U.S. for investment in its domestic operations, any such remittance could result in increased tax liabilities and a higher effective tax rate. Determination of the amount of the unrecognized deferred tax liability on these unremitted earnings is not practicable.
The components of the net deferred income tax assets and liabilities at January 26, 2025 and January 28, 2024 were as follows:
(in thousands)January 26, 2025January 28, 2024
Non-current deferred tax assets: 
Deferred revenue $2,351 — 
Inventory reserve7,501 $8,091 
Bad debt reserve405 447 
Foreign tax credits1,790  1,737 
Research credit carryforward91,214  78,593 
NOL carryforward128,595  107,030 
Payroll and related accruals7,989  8,253 
Share-based compensation4,608  2,904 
Foreign pension deferred793 632 
Accrued sales reserves4,332 3,498 
Research and development charges20,374 20,274 
Leasing deferred assets5,930 7,001 
OID interest9,692 12,812 
Other reserves1,463 1,176 
Section 163(J) Limitation34,072 17,696 
Other deferred assets3,558  4,181 
Intangibles67,397 72,946 
Valuation allowance(328,203) (304,355)
Total non-current deferred tax assets63,861  42,916 
Non-current deferred tax liabilities: 
Property, plant and equipment(7,135) (7,937)
Goodwill and other intangibles(7,700)(7,406)
Leasing deferred liabilities(5,334)(5,866)
Other non-current deferred tax liabilities(3,318) (4,523)
Total non-current deferred tax liabilities(23,487) (25,732)
Net deferred tax assets$40,374  $17,184 
As of January 26, 2025, the Company had U.S. gross federal and state research credits available of approximately $11.8 million and $22.9 million, respectively, which are available to offset taxable income. In connection with the Sierra Wireless Acquisition, the Company acquired approximately $6.6 million of fully reserved U.S. research credit carryforwards. The Company's U.S. credits will expire between fiscal years 2029 through 2045. The Company also had gross Canadian research credits available of approximately $72.1 million. Included in the $72.1 million are $32.4 million of Canadian research credit carryforwards that were acquired in connection with the Sierra Wireless Acquisition. The Company's Canadian credits will expire by fiscal year 2045.
As of January 26, 2025, the Company had U.S. gross federal net operating loss ("NOL") carryforwards of $26.5 million and state NOL carryforwards of $171.8 million, which, subject to certain limitations, are available to offset future taxable income through fiscal year 2045. The federal NOL carryforwards are primarily NOLs acquired in the Sierra Wireless Acquisition. These will expire at various dates through 2038 for losses generated prior to tax year 2018. For losses generated during tax year 2018 and future years, the NOL carryforward period is indefinite, but the loss utilization will be limited to 80% of taxable income. A portion of these losses may be subject to annual limitations due to ownership change provisions under Section 382 of the Internal Revenue Code ("IRC"). This limitation may result in the expiration of NOLs before utilization.
Additionally, the Company had fully reserved gross NOLs in Canada and France, for $58.9 million and $268.7 million respectively, for companies acquired during the Sierra Wireless Acquisition. The Company also has a gross Swiss NOL of $191.0 million, and a gross UK NOL of $4.1 million.
As of January 26, 2025 and January 28, 2024, the Company had approximately $368.6 million and $321.5 million of net deferred tax assets, respectively, the majority of which are in the U.S., Canada and France. The Company has recorded valuation allowances of $328.2 million and $304.4 million against its deferred tax assets at January 26, 2025 and January 28,
2024, respectively, based on the Company's assessment of its ability to utilize its deferred tax assets. The large increase in valuation allowance was mainly due to the Sierra Wireless Acquisition (discussed in Note 3). In connection with the acquisition, the Company reassessed the valuation allowances and evaluated the recoverability of its deferred tax assets, considering all available evidence such as earnings history and tax planning strategies. After weighing all positive and negative evidence, the Company maintains a valuation allowance for assets if it is more likely than not that some, or all, of its deferred tax assets will not be realized. Positive evidence considered included reversing taxable temporary differences. Negative evidence considered included the cumulative pre-tax losses recorded during the three-year period ended January 26, 2025, on both an annual and cumulative basis. In jurisdictions where the Company has cumulative losses, the Company has recorded a full valuation allowance on deferred tax assets. As of January 26, 2025, the Company continues to maintain full valuation allowance on DTAs in the U.S. and France, as well as a partial valuation allowance on DTAs in Canada.
Changes in the valuation allowance for the three years ended January 26, 2025 are summarized in the table below:
Fiscal Year Ended
(in thousands)January 26, 2025January 28, 2024January 29, 2023
Beginning balance$304,355 $156,850 $17,506 
Assumed valuation allowance from Sierra Wireless Acquisition— — 116,528 
Additions35,071 147,505 22,816 
Releases(11,223)— — 
Ending balance$328,203   $304,355 $156,850 
The current year activity of $23.8 million primarily consists of valuation allowance on deferred tax assets related to disallowed interest expense carried forward in the U.S. and Canada, as well as NOL and R&D credit deferred tax assets in those regions. The change in the valuation allowance of $23.8 million is included in the fiscal year 2025 provision for income taxes in the Consolidated Statements of Operations.
Uncertain Tax Positions
The Company uses a two-step approach to recognize and measure uncertain tax positions ("UTP"). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (before federal impact of state items) is as follows:
Fiscal Year Ended
(in thousands)January 26, 2025January 28, 2024
Beginning balance$36,548 $31,471 
Net additions based on tax positions related to the current year1,356 1,016 
Additions based on tax positions related to prior years646 5,227 
Reductions as a result of lapsed statutes(17,584)(834)
Reductions for settlements with tax authorities— (332)
Ending balance$20,966 $36,548 
Included in the balance of gross unrecognized tax benefits at January 26, 2025 and January 28, 2024, are $4.8 million and $14.6 million, respectively, of net tax benefits (after federal impact of state items) that, if recognized, would impact the effective tax rate. During fiscal year 2025, the Company released a reserve due to the lapse of a statute of limitations. The Company believes that it is reasonably possible that its balance of gross unrecognized tax benefits may decrease by approximately $0.3 million within the next twelve months.
The liability for UTP is reflected on the Balance Sheets as follows:
Fiscal Year Ended
(in thousands)January 26, 2025January 28, 2024
Deferred tax assets - non-current$14,255 $20,519 
Other long-term liabilities4,775 14,632 
Total uncertain tax positions$19,030 $35,151 
The Company’s policy is to include net interest and penalties related to unrecognized tax benefits within the provision for taxes in the Statements of Operations. The Company had approximately $0.6 million of net interest and penalties accrued at January 26, 2025.
Tax years prior to 2013 (the Company’s fiscal year 2014) are generally not subject to examination by the IRS except for items involving tax attributes that have been carried forward to tax years whose statute of limitations remains open. For state returns in the U.S., the Company is generally not subject to income tax examinations for years prior to 2012 (the Company’s fiscal year 2013). The Company has a significant tax presence in Switzerland for which Swiss tax filings have been examined through fiscal year 2020. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. The Company believes that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed in the Company’s tax examinations are resolved in a manner not consistent with the Company's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.