Income Taxes

6 Months Ended

Apr. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

For interim financial reporting, the Company estimates its annual effective tax rate based on the projected income for its entire fiscal year and records a provision (benefit) for income taxes on a quarterly basis based on the estimated annual effective income tax rate, adjusted for any discrete tax items.

The Company recorded an income tax benefit of $0.4 million for the three months ended April 30, 2022, or 14.8% of pre-tax loss, compared to $7.2 million of expense, or 25.8% of pretax income, for the three months ended April 30, 2021. Results for the three months ended April 30, 2022 were unfavorably impacted by $0.3 million of net discrete tax expense related to the loss of a tax attribute. Results for the three months ended April 30, 2021 were favorably impacted by $0.1 million of net discrete tax benefit primarily related to stock-based compensation tax deductions.

The Company recorded an income tax benefit of $2.2 million for the six months ended April 30, 2022, or 42.3% of pre-tax loss, compared to $7.2 million of expense, or 25.9% of pretax income, for the six months ended April 30, 2021. Results for the six months ended April 30, 2022 were favorably impacted by $0.9 million of net discrete tax benefit primarily related to stock-based compensation tax deductions. Results for the six months ended April 30, 2021 were favorably impacted by $1.2 million of net discrete tax benefit related primarily to the recognition of deferred taxes on assets classified as held for sale and stock-based compensation tax deductions. The Company periodically evaluates its valuation allowance requirements as facts and circumstances change and may adjust its deferred tax asset valuation allowances accordingly. It is reasonably possible that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in the current operations through the Company’s effective income tax rate.

The Company’s liability for unrecognized tax benefits, including interest and penalties, was $4.1 million as of April 30, 2022 and $4.0 million as of October 31, 2021. The unrecognized tax benefits are presented in other long-term liabilities in the Company’s Condensed Unaudited Consolidated Balance Sheets as of April 30, 2022 and the Consolidated Balance Sheets as of October 31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in its Condensed Unaudited Consolidated Statement of Operations and Comprehensive (Loss) Income.

The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of April 30, 2022, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates and/or from its historical income tax provisions and income tax liabilities and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments related to income tax examinations.