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Income Taxes | 6 Months Ended
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Nov. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 8. INCOME TAXES We recorded an income tax benefit of $0.2 million and $0.1 million for the first six months of fiscal 2025 and the first six months of fiscal 2024, respectively. The effective income tax rate during the first six months of fiscal 2025 was a tax benefit of 60.4% as compared to a tax benefit of 16.5% during the first six months of fiscal 2024. The difference in rate during the first six months of fiscal 2025 as compared to the first six months of fiscal 2024 reflects changes in the geographical distribution of income (loss), which is primarily driven by an increase in U.S. earnings for fiscal 2025 and the state income tax provision, as well as the impact of U.S. research and development credits. The 60.4% effective income tax rate differs from the federal statutory rate of 21% as a result of the geographical distribution of income (loss), as well as the utilization of the U.S. research and development credit. In the normal course of business, we are subject to examination by taxing authorities throughout the world. Years prior to fiscal 2015 are closed for examination under the statute of limitation for U.S. federal, and U.S. state. In Netherlands, years prior to fiscal 2020 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. We have no current open audits in the U.S. We have historically determined that certain undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions. The deferred tax liability related to undistributed earnings of our foreign subsidiaries was less than $0.1 million as of November 30, 2024 and June 1, 2024. The Company recorded $0.3 million for uncertain tax positions as of November 30, 2024 as compared to $0.1 million as of June 1, 2024. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive (Loss) Income. Accrued interest was included within the related tax liability line in the Consolidated Balance Sheets. We have recorded a liability of less than $0.1 million for interest and penalties as it relates to the reserve of the research and development credit as of June 1, 2024 and November 30, 2024. The Company maintains a valuation allowance representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance was $2.2 million as of November 30, 2024 and June 1, 2024. The current valuation allowance is recorded on deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.1 million) and state NOLs ($1.1 million). The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

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