INCOME TAXES

9 Months Ended

Jul. 31, 2024

INCOME TAXES

INCOME TAXES

12.  INCOME TAXES

Our provision for income taxes and effective tax rate is affected by the geographic composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates, and other events that are not consistent from period to period, such as changes in income tax laws.

We recorded an income tax expense during the first nine months of fiscal 2024 of $6.4 million compared to $1.3 million for the same period in fiscal 2023. Our effective tax rate for the first nine months of fiscal 2024 was (74%), compared to 40% in the corresponding prior year period. The year-over-year increase in income tax expense for the nine months of fiscal 2024 was primarily due to an $8.2 million non-cash valuation allowance on U.S. deferred tax assets, changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, and discrete items related to unvested stock compensation. Because we have a valuation allowance recorded against our U.S. deferred tax assets, we did not record a tax benefit for our U.S. net losses for the nine months ended July 31, 2024. The valuation allowance recorded during the third quarter of fiscal 2024 reflects a full valuation allowance of the U.S. deferred tax assets and was recorded based on our conclusion that the deferred tax assets were not more likely than not going to be realized.  

Our unrecognized tax benefits were $192,000 as of July 31, 2024, and $182,000 as of October 31, 2023, and in each case included accrued interest.

We recognize accrued interest and penalties related to unrecognized tax benefits as components of income tax expense. As of July 31, 2024, the gross amount of interest accrued, reported in Accrued expenses, was approximately $54,000, which did not include the federal tax benefit of interest deductions.

We file U.S. federal and state income tax returns, as well as tax returns in several foreign jurisdictions. The statutes of limitations with respect to unrecognized tax benefits will expire between August 2024 and August 2025.