Income Taxes

6 Months Ended

Jul. 31, 2024

Income Taxes

Income Taxes

10. Income Taxes

The Company’s provision for income taxes for the three months ended July 31, 2024, and 2023 is based on the estimated annual effective tax rate, in addition to discrete items.

The Company’s effective tax rate for the second quarter of FY25 was 23.4%, which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and Global Intangible Low-Taxed Income (“GILTI”), and the impacts from stock compensation vestings during the quarter, partially offset by foreign withholding taxes accrued during the quarter in anticipation of additional repatriations of cash from China. The Company's effective tax rate for the second quarter of FY24 was 32.7% which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and GILTI.  

The Company's effective tax rate for the six months ended July 31, 2024 was (13.1%), which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI and impacts from the final earn-out adjustments related to the Pacific and Eagle acquisitions.  The Company's effective tax rate for the six months ended July 31, 2023 was 31.5%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI.   

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. The valuation allowance was $7.6 million and $6.7 million as of July 31, 2024 and January 31, 2024, respectively.

With the exception of our UK and China subsidiaries for which we accrue relevant deferred tax impacts related to non-indefinitely reinvested cash, we consider the excess of the amount for financial reporting over the tax basis (including undistributed and previously taxed earnings) of investments in our other foreign subsidiaries as of July 31, 2024 to be indefinitely reinvested in the foreign jurisdictions on the basis of our specific plan for reinvestment and estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. Therefore, we have not provided for deferred taxes related to such excess or the relevant portions thereof and disclosed that the determination of any deferred taxes related to this excess is not practicable in those permanently reinvested jurisdictions. We have made no changes to our policy on indefinite reinvestment during the six months ended July 31, 2024.