XML 138 R15.htm IDEA: XBRL DOCUMENT
v3.19.3

Income taxes | 12 Months Ended
--- | ---
Sep. 28, 2019
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The Company’s loss before provision for (benefit from) income taxes for fiscal 2019, 2018 and 2017 were as follows:
| 2019 |  | 2018 |  | 2017
(In thousands)
Domestic | $ | (858 | ) |  | $ | 2,803 |  |  | $ | (25,005 | )
Foreign | (218 | ) |  | (17,351 | ) |  | 8,497 |
Loss before provision for (benefit from) income taxes | $ | (1,076 | ) |  | $ | (14,548 | ) |  | $ | (16,508 | )
Components of the provision for (benefit from) income taxes consisted of the following:
| 2019 |  | 2018 |  | 2017
(In thousands)
Current: |  |  |  |  |
U.S. Federal | $ | 1,366 |  |  | $ | — |  |  | $ | — |
U.S. State | 1,132 |  |  | 177 |  |  | 62 |
Foreign | 1,463 |  |  | 816 |  |  | (3,791 | )
Total current | 3,961 |  |  | 993 |  |  | (3,729 | )
Deferred: |  |  |  |  |
U.S. Federal | — |  |  | (168 | ) |  | — |
U.S. State | — |  |  | — |  |  | — |
Foreign | (271 | ) |  | 231 |  |  | 1,438 |
Total deferred | (271 | ) |  | 63 |  |  | 1,438 |
Provision for (benefit from) income taxes | $ | 3,690 |  |  | $ | 1,056 |  |  | $ | (2,291 | )
Components of the Company’s net deferred income tax assets (liabilities) are as follows:
| 2019 |  | 2018
(In thousands)
Deferred tax assets |  |  |
Accrued expenses and reserves | $ | 12,582 |  |  | $ | 5,639 |
Deferred revenue | 11,185 |  |  | 10,317 |
U.S. net operating loss carryforwards | 15,112 |  |  | 18,385 |
Foreign net operating loss carryforwards | 3,414 |  |  | 5,625 |
Tax credit carryforwards | 43,411 |  |  | 22,969 |
Stock-based compensation | 10,368 |  |  | 7,237 |
Amortization | 4,131 |  |  | 3,237 |
Depreciation | 672 |  |  | — |
Other | 453 |  |  | 427 |
Total deferred tax assets | 101,328 |  |  | 73,836 |
Valuation allowance | (95,088 | ) |  | (72,380 | )
Deferred tax assets, net of valuation allowance | 6,240 |  |  | 1,456 |
Deferred tax liabilities |  |  |
Tax accounting method change | (5,086 | ) |  | — |
Depreciation | — |  |  | (515 | )
Total deferred tax liabilities | (5,086 | ) |  | (515 | )
Net deferred tax assets | $ | 1,154 |  |  | $ | 941 |
After considering all available positive and negative evidence, the Company has determined it is more likely than not that deferred tax assets in the United States and the Netherlands will not be realized and that a full valuation allowance is required. The Company has maintained a full valuation allowance on its U.S. deferred tax assets due to its history of U.S. operating losses. It is possible that within the next 12 months there may be sufficient positive evidence to release a significant portion of the valuation allowance. Release of the U.S. valuation allowance would result in the establishment of certain deferred tax assets and a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The exact timing and amount of the valuation allowance release are subject to change based on the level of profitability achieved. The Company has deferred tax assets in other foreign jurisdictions which it determined are more likely than not to be fully realized. As of September 28, 2019, the Company had gross federal and post-apportionment state net operating loss carryforwards of $60.6 million and $36.2 million, respectively, available to reduce future taxable income. The earliest federal and state net operating loss carryforwards expire in varying amounts beginning in 2035 and 2027, respectively. As of September 28, 2019, the Company had gross foreign net operating loss carryforwards of $16.1 million, of which $1.4 million have an indefinite life and $14.7 million will expire in 2027. The Company also has gross federal and state research and development tax credits carryforwards of $33.8 million and $25.9 million, respectively. The federal research credits will begin to expire in the year 2025, and the state research credits will begin to expire in the year 2024. Because of the change of ownership provisions of Sections 382 and 383 of the Code, use of a portion of the Company’s domestic net operating losses and tax credit carryforwards may be limited in future periods depending upon future changes in ownership. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities if sufficient taxable income is not generated in future periods. The following table summarizes changes in the valuation allowance for fiscal 2019, 2018 and 2017:
(In thousands) | 2019 |  | 2018 |  | 2017
Beginning balance | $ | 72,380 |  |  | $ | 94,956 |  |  | $ | 95,882 |
Increase (decrease) during the period | 22,708 |  |  | (22,576 | ) |  | (926 | )
Ending balance | $ | 95,088 |  |  | $ | 72,380 |  |  | $ | 94,956 |
Reconciliation of U.S. statutory federal income taxes to the Company’s provision for (benefit from) income taxes is as follows:
(In thousands) | 2019 |  | 2018 |  | 2017
U.S. federal income taxes at statutory rate | $ | (226 | ) |  | $ | (3,570 | ) |  | $ | (5,778 | )
U.S. state and local income taxes | (9,315 | ) |  | (1,441 | ) |  | (2,454 | )
Foreign income tax rate differential | 129 |  |  | (53 | ) |  | (1,101 | )
Dutch tax settlement | — |  |  | — |  |  | 7,361 |
Stock-based compensation | (2,399 | ) |  | 4,025 |  |  | 1,503 |
Federal research tax credits | (8,418 | ) |  | (4,333 | ) |  | (2,978 | )
Unrecognized federal tax benefits | (2,806 | ) |  | 1,990 |  |  | 1,191 |
Change in tax rate | 1,161 |  |  | 25,725 |  |  | — |
Net Impact of GILTI | 239 |  |  | — |  |  | — |
BEAT | 781 |  |  | — |  |  | — |
Other | 822 |  |  | 259 |  |  | 1,197 |
Change in valuation allowance | 23,722 |  |  | (21,546 | ) |  | (1,232 | )
Provision for (benefit from) income taxes | $ | 3,690 |  |  | $ | 1,056 |  |  | $ | (2,291 | )
In January 2017, the Company entered into a unilateral Advance Pricing Agreement (the "APA") with the Dutch Tax Administration. The APA establishes an intercompany licensing arrangement whereby the operating profit or loss, as determined under U.S. GAAP, of Sonos Europe B.V. and Sonos, Inc. will be allocated between the two companies based on relative contribution to the development of marketing and technology intangibles. The APA has a five-year term that commenced on October 2, 2016 and ends on September 30, 2021. Change in unrecognized tax benefits as a result of uncertain tax positions are as follows:
| 2019 |  | 2018
(In thousands)
Beginning balance | $ | 17,794 |  |  | $ | 13,780 |
Increase (decrease) - tax positions in prior periods | (8,226 | ) |  | 636 |
Increase (decrease) - tax positions in current periods | 2,959 |  |  | 3,378 |
Ending balance | $ | 12,527 |  |  | $ | 17,794 |
The Company does not anticipate changes to unrecognized benefits within the next 12 months that would result in a material change to the Company’s financial position. The Company conducts business in a number of tax jurisdictions and, as such, is required to file income tax returns in multiple jurisdictions globally. U.S. federal income tax returns for the 2015 tax year and earlier are no longer subject to examination by the U.S. Internal Revenue Service (the "IRS"). All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and state purposes. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. There was no accrued interest or penalties as of September 28, 2019 and September 29, 2018. As of September 28, 2019, no tax provision has been made for $5.9 million of undistributed earnings of certain of the Company’s subsidiaries as these earnings are considered indefinitely reinvested. If, in the future, the Company decides to repatriate the undistributed earnings from these subsidiaries in the form of dividends or otherwise, the Company could be subject to withholding taxes payable at that time. The amount of withholding tax liability is dependent on circumstances existing if and when a remittance occurs but could be reasonably estimated to be $0.5 million.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration