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Income Taxes
 12 Months Ended
Aug. 31, 2025
Income Taxes [Abstract]  
Income Taxes

15. INCOME TAXES

Our provision for income taxes consisted of the following (in thousands):

YEAR ENDED

AUGUST 31,

2025

2024

2023

Current:

Federal

$

376

$

(4,040)

$

-

State

(466)

(1,675)

(791)

Foreign

(1,852)

(2,174)

(2,389)

(1,942)

(7,889)

(3,180)

Deferred:

Federal

(1,303)

2,309

1,545

State

143

730

225

Foreign

647

(395)

216

Operating loss carryforward

925

(3,245)

(7,201)

Valuation allowance

(1,469)

(1,154)

372

Foreign tax credit carryforward

reduction

-

-

(65)

(1,057)

(1,755)

(4,908)

$

(2,999)

$

(9,644)

$

(8,088)

The allocation of our total income tax provision is as follows (in thousands):

YEAR ENDED

AUGUST 31,

2025

2024

2023

Net income

$

(2,999)

$

(9,644)

$

(8,088)

Other comprehensive income

(21)

(11)

(80)

$

(3,020)

$

(9,655)

$

(8,168)

Income before income taxes was generated as follows (in thousands):

YEAR ENDED

AUGUST 31,

2025

2024

2023

United States

$

8,698

$

32,456

$

23,574

Foreign

(2,631)

590

2,295

$

6,067

$

33,046

$

25,869

The differences between income taxes at the statutory federal income tax rate and the consolidated income tax rate reported in our consolidated income statements and statements of comprehensive income were as follows:

YEAR ENDED

AUGUST 31,

2025

2024

2023

Federal statutory income tax rate

(21.0)

%

(21.0)

%

(21.0)

%

State income taxes, net of federal effect

(9.8)

(4.0)

(4.7)

Valuation allowance

(24.2)

(3.5)

1.4 

Foreign tax credit carryforward

reduction

-

-

(0.3)

Foreign rate differential

8.8 

1.6 

(1.6)

Uncertain tax positions

3.6 

(0.3)

(0.9)

Non-deductible executive compensation

(14.0)

(9.7)

(3.6)

Non-deductible meals and entertainment

(5.3)

(0.8)

(0.7)

Other stock-based compensation

3.6 

7.7 

(0.4)

Return to provision adjustments

8.7 

0.8 

0.6 

Other

0.2 

-

(0.1)

(49.4)

%

(29.2)

%

(31.3)

%

Our effective income tax expense rate for fiscal 2025 of 49.4% was higher than the statutory tax rate primarily due to tax expense of $1.5 million for increases to the valuation allowance against our deferred income tax assets in some foreign jurisdictions and $0.9 million related to non-deductible executive compensation, which were partially offset by a $0.5 million benefit in tax differential on foreign income. Pre-tax income for fiscal 2025 was significantly lower than in prior years. As a result, certain permanent items such as valuation allowance adjustments and non-deductible expenses, had a proportionally larger impact on the effective tax rate than in prior periods with higher earnings.

Our effective income tax expense rate for fiscal 2024 of 29.2% was higher than the statutory tax rate primarily due to tax expense of $3.2 million for non-deductible executive compensation and a $1.2 million increase in the valuation allowance against our deferred income tax assets, which were partially offset by a $2.6 million benefit for share-based compensation deductions in excess of the corresponding book expense and a $0.5 million benefit in tax differential on income subject to both U.S. and foreign taxes.

Our effective income tax expense rate for fiscal 2023 of 31.3% was higher than the statutory tax rate primarily due to tax expense of $0.9 million for non-deductible executive compensation and $0.4 million in tax differential on income subject to both U.S. and foreign taxes, which were partially offset by a $0.4 million decrease in the valuation allowance against our deferred income tax assets.

We are subject to the anti-deferral provisions on Global Intangible Low-Taxed Income (GILTI) under the Tax Cut and Jobs Act of 2017. We have elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the Period Cost Method). We recorded no income tax expense in each of fiscal 2025 and fiscal 2024, and income tax expense of $0.2 million in fiscal 2023 under the GILTI provisions.


‎

The significant components of our deferred tax assets and liabilities were as follows (in thousands):

AUGUST 31,

2025

2024

Deferred income tax assets:

Net operating loss carryforward

$

4,460 

$

3,447 

Deferred revenue

3,892 

2,970 

Capitalized development costs

2,954 

2,156 

Stock-based compensation

2,457 

3,760 

Operating lease liabilities

1,509 

-

Inventory and bad debt reserves

834 

923 

Bonus and other accruals

774 

1,317 

Self-constructed tangible assets

547 

404 

Foreign income tax credit

carryforward

384 

-

Property and equipment depreciation

346 

-

Sale and financing of corporate

headquarters

-

1,041 

Other

359 

174 

Total deferred income tax assets

18,516 

16,192 

Less: valuation allowance

(3,936)

(2,467)

Net deferred income tax assets

14,580 

13,725 

Deferred income tax liabilities:

Intangibles step-ups – indefinite lived

(5,451)

(5,433)

Intangibles step-ups – finite lived

(1,291)

(1,873)

Intangible asset amortization

(4,218)

(4,217)

Deferred commissions

(4,109)

(3,827)

Operating lease right-of-use assets

(1,494)

-

Property and equipment depreciation

(1,157)

(132)

Unremitted earnings of foreign

subsidiaries

(453)

(505)

Other

(167)

-

Total deferred income tax liabilities

(18,340)

(15,987)

Net deferred income taxes

$

(3,760)

$

(2,262)

Deferred income tax amounts are recorded as follows in our consolidated balance sheets (in thousands):

AUGUST 31,

2025

2024

Long-term assets

$

231

$

870

Long-term liabilities

(3,991)

(3,132)

Net deferred income tax liability

$

(3,760)

$

(2,262)

Our U.S. federal net operating loss carryforwards were comprised of the following at August 31, 2025 (in thousands):

Loss Carryforward

Loss

Loss

Operating

Loss Carryforward

Expires

Deductions

Deductions

Loss Carried

for Year Ended

August 31,

Amount

in Prior Years

in Current Year

Forward

Acquired NOL - Jhana

December 31, 2016

2035

$

3,052 

$

(1,124)

$

(215)

$

1,713 

July 15, 2017

2036

1,117 

-

-

1,117 

4,169 

(1,124)

(215)

2,830 

Acquired NOL - Strive

December 31, 2020

No Expiration

1,133 

(1,000)

(133)

-

April 25, 2021

No Expiration

553 

-

(553)

-

1,686 

(1,000)

(686)

-

$

5,855 

$

(2,124)

$

(901)

$

2,830 

We have U.S. state net operating loss carryforwards generated in fiscal 2009 and before in various jurisdictions that expire primarily between September 1, 2026 and August 31, 2029. The U.S. state net operating loss carryforwards generated in fiscal 2019 through fiscal 2025 expire between August 31, 2029 and August 31, 2035. The state net operating loss carryforwards acquired through the purchase of Jhana stock expire between August 31, 2034 and August 31, 2036. The remaining state net operating loss carryforward acquired through the purchase of Strive stock expires August 31, 2041. The state net operating loss carryforwards generated in fiscal 2022 expire on August 31, 2042.

During fiscal 2025 we generated a foreign tax credit amount of $1.2 million, of which $0.8 million was utilized, leaving a carryforward to future years of $0.4 million as of August 31, 2025.

During fiscal 2023 we reversed the valuation allowance for certain foreign subsidiaries and increased the valuation allowance for certain other foreign subsidiaries, for a net decrease in our total valuation allowance. During fiscal 2024 we decreased the valuation allowance for a certain foreign subsidiary and increased the valuation allowance for certain other foreign subsidiaries, for a net increase in our total valuation allowance. During fiscal 2025 we increased the valuation allowance for certain foreign subsidiaries. The valuation allowance at August 31, 2025 relates primarily to the losses of certain foreign subsidiaries which we expect will expire unused.

Activity in our deferred income tax asset valuation allowance was as follows for the periods indicated (in thousands):

YEAR ENDED

AUGUST 31,

2025

2024

2023

Beginning balance

$

2,467

$

1,313

$

1,685

Charged to costs and expenses

1,497

1,250

212

Deductions

(28)

(96)

(584)

Ending balance

$

3,936

$

2,467

$

1,313

Except for the deferred tax assets subject to valuation allowances, we have determined that projected future taxable income is adequate to allow for realization of all deferred tax assets. We considered sources of taxable income, including reversals of taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and reasonable, practical tax-planning strategies to generate additional taxable income. Based on the factors described above, we concluded that realization of our deferred tax assets, except those subject to the valuation allowances described above, is more likely than not at August 31, 2025.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

YEAR ENDED

AUGUST 31,

2025

2024

2023

Beginning balance

$

1,639

$

1,618

$

1,597

Additions based on tax positions

related to the current year

62

491

188

Additions for tax positions in

prior years

30

73

290

Reductions for tax positions of prior

years resulting from the lapse of

applicable statute of limitations

(328)

(255)

(186)

Other reductions for tax positions of

prior years

(70)

(288)

(271)

Ending balance

$

1,333

$

1,639

$

1,618

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $1.1 million at August 31, 2025 and $1.3 million at each of August 31, 2024 and 2023. Included in the ending balance of gross unrecognized tax benefits at August 31, 2025 is $0.6 million related to individual states’ net operating loss carryforwards. Interest and penalties related to uncertain tax positions are recognized as components of income tax expense. The net accruals and reversals of interest and penalties had an insignificant effect on our income tax expense in fiscal 2025 and 2024 and increased our income tax expense by $0.1 million in fiscal 2023. The balance of interest and penalties included in other long-term liabilities on our consolidated balance sheets was $0.4 million at each of August 31, 2025 and 2024. During the next 12 months, we expect an immaterial change in unrecognized tax benefits.

We file United States federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The tax years that remain subject to examinations for our major tax jurisdictions are shown below.

2018-2025

Australia, Canada, and Japan

2016-2025

China

2020-2025

Germany, Switzerland, and Austria

2021-2025

United Kingdom, Singapore

2025-2025

France

2021-2025

United States – state and local income tax

2022-2025

United States – federal income tax