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Income Taxes

12 Months Ended

Apr. 30, 2023

Income Taxes

Income Taxes

15.          Income Taxes

​

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

​

​	​	​	​	​	​	​	​	​	​	​
​		Year Ended April 30,
​	​	2023		​	2022		​	2021
Domestic	​	$	(187,647)	​	$	(10,187)	​	$	34,274	​
Foreign	​	​	(730)	​		(8,956)	​		91	​
(Loss) income before income taxes	​	​	(188,377)	​	​	(19,143)	​	​	34,365	​
​	​	​	​	​	​	​	​	​	​	​
Equity method investment (loss) income	​	​	(2,453)	​	​	5,889	​	​	(10,481)	​
Total (loss) income before income taxes	​	$	(190,830)	​	$	(13,254)	​	$	23,884	​

​

The Company expects any foreign earnings to be reinvested in such foreign jurisdictions and, therefore, no deferred tax liabilities for U.S. income taxes on undistributed earnings are recorded. The foreign subsidiaries do not have any undistributed earnings.
​

A reconciliation of income tax expense computed using the U.S. federal statutory rates to actual income tax expense is as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended April 30,							​
​		2023	​		2022			2021	​
U.S. federal statutory income tax rate		21.0	%	​	21.0	%	​	21.0	%
Foreign rate differential	​	(0.1)	​	​	4.9	​	​	—	​
State and local income taxes, net of federal benefit		0.2	​	​	40.8	​	​	(1.4)	​
R&D and other tax credits		(1.8)	​	​	23.0	​	​	(11.5)	​
Valuation allowance		1.1	​	​	(37.4)	​	​	3.2	​
Return to provision adjustments	​	—	​	​	(0.9)	​	​	(0.3)	​
Permanent items	​	(0.7)	​	​	(3.3)	​	​	3.6	​
Foreign derived intangible income	​	2.3	​	​	—	​	​	(7.6)	​
Excess benefit of equity awards	​	0.8	​	​	5.2	​	​	(5.7)	​
Goodwill impairment	​	(17.2)	​	​	—	​	​	—	​
Unrecognized tax benefit	​	2.0	​	​	—	​	​	—	​
Other		0.2	​	​	0.9	​	​	0.3	​
Effective income tax rate		7.8	%	​	54.2	%	​	1.6	%

​

The components of the provision for income taxes are as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended April 30,
​		2023			2022			2021
Current:	​	​	​	​	​	​	​	​	​	​
Federal	​	$	1,510	​	$	(3,025)	​	$	3,094	​
State	​		1,474	​		165	​		448	​
Foreign	​	​	2,273	​	​	279	​	​	—	​
​	​		5,257	​		(2,581)	​		3,542	​
Deferred:	​	​	​	​	​	​	​	​	​	​
Federal	​		(17,226)	​		(5,764)	​		(3,247)	​
State	​		(1,488)	​		483	​		244	​
Foreign	​	​	(1,206)	​	​	(2,507)	​	​	—	​
​	​		(19,920)	​		(7,788)	​		(3,003)	​
Total income tax (benefit) expense	​	$	(14,663)	​	$	(10,369)	​	$	539	​

​

Significant components of the Company’s deferred income tax assets and liabilities are as follows (in thousands):

​

​	​	​	​	​	​	​	​
​	​	April 30,
​		2023			2022
Deferred income tax assets:	​	​	​	​	​	​	​
Accrued expenses	​	$	2,153	​	$	3,399	​
Stock based compensation	​	​	2,380	​	​	1,892	​
Allowances, reserves, and other	​		2,153	​		4,455	​
Outside basis difference	​	​	—	​	​	89	​
Unrealized loss on securities	​		3,528	​		3,229	​
Net operating loss and credit carry-forwards	​		20,430	​		41,931	​
Section 174 Capitalization	​	​	24,962	​	​	—	​
Intangibles basis	​		—	​		—	​
Lease liability	​	​	6,960	​	​	6,303	​
Total deferred income tax assets	​		62,566	​		61,298	​
Deferred income tax liabilities:	​	​	​	​	​	​	​
Fixed asset basis	​		(4,999)	​		(10,413)	​
Right-of-use asset	​	​	(6,478)	​	​	(5,878)	​
Intangibles basis	​	​	(3,109)	​	​	(15,503)	​
Total deferred income tax liabilities	​		(14,586)	​		(31,794)	​
Valuation allowance	​		(22,503)	​		(24,840)	​
Net deferred tax assets	​	$	25,477	​	$	4,664	​

​

At April 30, 2023 and 2022 the Company recorded a valuation allowance of $22,503,000 and $24,840,000, respectively, primarily against state R&D credits as the Company is currently generating more tax credits than it will utilize in future years and against capital loss carryforward. The valuation allowance decreased by $2,337,000 and increased by $7,387,000 for April 30, 2023 and April 30, 2022, respectively.

​

At April 30, 2023 the Company had federal credit carryforwards of $2,809,000 that will begin to expire in 2042 and state credit carryforwards of $23,330,000 that do not expire.

​

At April 30, 2023, the Company had federal, state and foreign net operating loss carryforwards of approximately $7,001,000, $93,289,000 and $64,000, respectively. The federal net operating losses carry forward indefinitely. The state net operating losses will begin expiring in fiscal year 2035, and the foreign loss carryforward will begin expiring in fiscal year 2024. Utilization of federal and state net operating loss carryforwards may be subject to substantial annual limitation due to the ownership changes as provided by Section 382 of the Internal Revenue Code and similar state provisions.

​

At April 30, 2023 and 2022, the Company had approximately $12,841,000 and $17,806,000, respectively, of unrecognized tax benefits of which $5,076,000 would impact the Company’s rate and $5,986,000 would result in an increase in valuation allowance. The Company estimates that $1,244,000 of its unrecognized tax benefits will decrease in the next twelve months due to statute of limitation expiration.

​

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits for the years ended April 30, 2023 and 2022 (in thousands):

​

​	​	​	​	​	​	​	​
​	​	April 30,
​		2023			2022
Balance as of May 1	​	$	17,806	​	$	17,556	​
Increases related to prior year tax positions	​		—	​		415	​
Decreases related to prior year tax positions	​		(379)	​		(239)	​
Increases related to current year tax positions	​		1,257	​		1,398	​
Decreases related to lapsing of statute of limitations	​		(5,843)	​		(1,324)	​
Balance as of April 30	​	$	12,841	​	$	17,806	​

​

The Company records interest and penalties on uncertain tax positions to income tax expense. As of April 30, 2023 and 2022, the Company had accrued approximately $282,000 and $302,000, respectively, of interest and penalties related to uncertain tax positions. The 2019 to 2022 tax years remain open to examination by the IRS for federal income taxes. The tax years 2012 and 2018 to 2022 remain open for major state taxing jurisdictions.

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- 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.

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