Income Taxes

12 Months Ended

Nov. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before income taxes are as follows (in thousands):

	Fiscal Year Ended
	November 30, 2022		November 30, 2021		November 30, 2020
U.S.	$	103,917	$	80,508	$	83,279
Foreign	13,338		15,026		13,356
Total	$	117,255	$	95,534	$	96,635

The provision for income taxes is comprised of the following (in thousands):

	Fiscal Year Ended
	November 30, 2022		November 30, 2021		November 30, 2020
Current:
Federal	$	20,118	$	11,964	$	12,294
State	5,039		2,602		3,871
Foreign	4,631		3,456		3,370
Total current	29,788		18,022		19,535
Deferred
Federal	(4,683)		366		(1,613)
State	(1,537)		(1,110)		(969)
Foreign	(1,382)		(164)		(40)
Total deferred	(7,602)		(908)		(2,622)
Total	$	22,186	$	17,114	$	16,913

A reconciliation of the income taxes incurred at the U.S. Federal statutory rate compared to the effective tax rate is as follows (in thousands):

	Fiscal Year Ended
	November 30, 2022		November 30, 2021		November 30, 2020
Tax at U.S. Federal statutory rate	$	24,624	$	20,062	$	20,293
Foreign rate differences	475		193		(200)
Effects of foreign operations included in U.S. Federal provision	401		(112)		(167)
State income taxes, net	2,424		1,215		2,087
Research credits	(1,268)		(410)		(905)
Tax-exempt interest	—		—		(3)
Nondeductible stock-based compensation	2,725		1,548		422
Meals and entertainment	185		61		162
Compensation subject to 162(m)	878		346		324
Uncertain tax positions and tax settlements	(163)		89		245
Net excess tax benefit or detriment from stock-based compensation plans	(266)		(11)		61
Global intangible low tax inclusion	17		606		(307)
Foreign derived intangible deduction	(7,769)		(6,386)		(5,297)
Other	(77)		(87)		198
Total	$	22,186	$	17,114	$	16,913

The effective income tax rate is based on the income for the year, the composition of the income in different countries, changes related to valuation allowances and adjustments, if any, for the potential tax consequences or benefits of audits or other tax contingencies. In

fiscal year 2022, our aggregate effective income tax rate in foreign jurisdictions is not materially different than our effective income tax rate in the United States. Our effective tax rate differed from the statutory U.S. Federal income tax rate primarily due to the net effects of the foreign derived intangible income (FDII) regime. In fiscal years 2021 and 2020 our aggregate effective income tax rate in foreign jurisdictions was lower than our effective income tax rate in the United States. A significant portion of income before provision for income taxes from foreign operations has been earned by subsidiaries with statutory income tax rates lower than the statutory U.S. Federal income tax rate.

The components of deferred tax assets and liabilities are as follows (in thousands):

	November 30, 2022		November 30, 2021
Deferred tax assets:
Accounts receivable	$	191	$	143
Accrued compensation	3,884		4,407
Accrued liabilities and other	1,352		2,898
Deferred revenue	12,461		8,081
Stock-based compensation	8,030		6,401
Original issue discount	7,169		9,132
Tax credit and loss carryforwards	27,809		35,376
Operating lease liabilities	4,082		5,257
Gross deferred tax assets	64,978		71,695
Valuation allowance	(6,275)		(7,315)
Total deferred tax assets	58,703		64,380
Deferred tax liabilities:
Goodwill	(23,745)		(21,867)
Right-of-use lease assets	(2,938)		(3,925)
Deferred revenue	—		(1,483)
Depreciation and amortization	(20,875)		(34,532)
Prepaid expenses	(4,008)		(1,906)
Notes payable	—		(13,415)
Total deferred tax liabilities	(51,566)		(77,128)
Total	$	7,137	$	(12,748)

The valuation allowance primarily applies to net operating loss carryforwards and unutilized tax credits in foreign jurisdictions under conditions where realization is not more likely than not. The $1 million decrease in the valuation allowance during fiscal year 2022 primarily relates to losses in a foreign subsidiary that have expired prior to utilization.

At November 30, 2022, we have federal and foreign net operating loss carryforwards of $96.9 million expiring on various dates through 2036 and $19.4 million that do not expire. In addition, we have state net operating loss carryforwards of $48.9 million expiring on various dates through 2044 and a minimal amount that does not expire. At November 30, 2022, we have state tax credit carryforwards of approximately $3.6 million expiring on various dates through 2037 and $2.4 million that may be carried forward indefinitely. In addition, we have federal tax credit carryforwards of approximately $5.9 million expiring on various dates through 2039.

It is our intention to indefinitely reinvest the earnings of our non-U.S. subsidiaries. We have not provided for U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries, which totaled $106.6 million as of November 30, 2022, as these earnings have been indefinitely reinvested. It is not practicable to determine the amount of the unrecognized deferred tax liability if the undistributed earnings were to be repatriated due to the complexity of the income tax laws and regulations. These earnings could be subject to non-U.S. withholding taxes and other federal, state and/or foreign taxes if they were remitted to the U.S.

As of November 30, 2022, the total amount of unrecognized tax benefits was $5.3 million, of which $1.3 million was recorded in other noncurrent liabilities on the consolidated balance sheet and $4.0 million of deferred tax assets, principally related to U.S net operating loss carry-forwards and federal and state research and development tax credits, have not been recorded.

A reconciliation of the balance of our unrecognized tax benefits is as follows (in thousands):

	Fiscal Year Ended
	November 30, 2022		November 30, 2021		November 30, 2020
Balance, beginning of year	$	5,471	$	6,219	$	4,993
Tax positions related to current period	—		71		—
Tax positions related to a prior period	—		(820)		539
Tax positions acquired	—		439		1,596
Settlements with tax authorities	(45)		(168)		(12)
Lapses due to expiration of the statute of limitations	(150)		(270)		(897)
Balance, end of year	$	5,276	$	5,471	$	6,219

If recognized, all amounts of unrecognized tax benefits would affect the effective tax rate.

We recognize interest and penalties related to uncertain tax positions as a component of our provision for income taxes. In fiscal year 2022 there was a minimal amount of estimated interest and penalties recorded in the provision for income taxes. In fiscal year 2021 a net expense of $0.8 million was recorded to the provision for income taxes related to estimated interest and penalties. In fiscal year 2020 there was a minimal amount of estimated interest and penalties recorded in the provision for income taxes. We have accrued $1.3 million and $1.2 million of estimated interest and penalties at November 30, 2022 and 2021, respectively. We do not expect any significant changes to the amount of unrecognized tax benefits in the next twelve months.

Our federal income tax returns have been examined or are closed by statute for all years prior to fiscal year 2019. Our state income tax returns have been examined or are closed by statute for all years prior to fiscal year 2018, and we are no longer subject to audit for those periods.

Tax authorities for certain non-U.S. jurisdictions are also examining tax returns and the Company does not expect the results of these examinations to be material to our consolidated balance sheets, cash flows or statements of income. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal year 2017.