Income Taxes |
3 Months Ended |
|---|---|
Apr. 30, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in the applicable quarter. Each quarter, we update the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate may change due to several factors, including the relative amount of income we earn in various jurisdictions and certain book-tax differences. For the three months ended April 30, 2026 and 2025, we had a provision for income taxes of $18.4 million and $2.8 million, respectively, reflecting an effective tax rate of 45.0% and (14.3)%, respectively. For the three months ended April 30, 2026, our effective tax rate differed from the U.S. federal statutory rate primarily as a result of U.S. tax on foreign earnings and tax rate differences between the U.S. and foreign countries. For the three months ended April 30, 2025, our effective tax rate differed from the U.S. federal statutory rate primarily as a result of not recognizing deferred tax expense due to a full valuation allowance on U.S. and Romania deferred tax assets ("DTAs") and due to tax rate differences between the U.S. and foreign countries. The realization of tax benefits of net DTAs is dependent upon future levels of taxable income of an appropriate character in the periods in which the items are expected to be deductible or taxable. As of April 30, 2026, based on the available positive and negative evidence, including the amount of taxable income in the U.S. in recent years and our expectation of future profits in the U.S., we believe it is more likely than not that certain of our U.S. state DTAs and our Romania DTAs will not be realized. Therefore, we continue to maintain a full valuation allowance against such DTAs. We intend to maintain each of these full valuation allowances until sufficient positive evidence exists to support a reversal of, or decrease in, each of the respective valuation allowances. Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that sufficient positive evidence may become available to allow us to conclude that a valuation allowance is no longer needed for these U.S. state DTAs during fiscal year 2027, and for these Romania DTAs, or a portion thereof, during fiscal year 2028, which would result in income tax benefit in the period of the respective release. As of April 30, 2026, we had a reserve for gross unrecognized tax benefits totaling $27.1 million related to income taxes, which would impact the effective tax rate if recognized. Of this amount, $26.2 million pertains to uncertain tax positions, and the remainder relates to interest and penalties, which are accounted for as a component of our income tax provision. Our tax positions are subject to income tax audits in multiple tax jurisdictions globally. Our estimates of the potential outcome of any uncertain tax position are subject to management's assessment of the relevant risks, facts, and circumstances existing at that time. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. However, our future results may include adjustments to estimates in the period the audits are settled, which may impact our effective tax rate. Our India subsidiary is currently appealing the corporate income tax assessment of $1.9 million for the audit period of April 2022 through March 2023. It also has an open corporate income tax audit for the period from April 2022 through March 2024. However, following the signing of an advance pricing agreement during the three months ended April 30, 2026, India tax disputes for transfer pricing matters are expected to be withdrawn within the next three months. Our Romania subsidiary is currently appealing the corporate income tax audit decision for the period from January 2018 through January 2022. In addition, a valid bilateral transfer pricing agreement between our U.S. entity and our Romania entity on the transfer pricing methodology for the cost contribution agreement has been finalized and signed for tax years 2023 through 2028. The bilateral transfer pricing negotiations for our transfer pricing model between Japan and Romania are still underway, with the expectation of being finalized during the first half of fiscal year 2027, consistent with the tax position we have adopted. On December 20, 2021, the Organization for Economic Co-operation and Development ("OECD") published the Pillar Two Model Rules defining the global minimum tax for multinational enterprises with an annual revenue above €750.0 million. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. We assessed and have determined that the Pillar Two Model Rules do not have a significant impact on our estimated effective tax rate for fiscal year 2027. We will continue to monitor the developments and evaluate potential impact on future periods.
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