v3.26.1
Income Taxes
 12 Months Ended
Jul. 03, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before provision for income taxes during fiscal 2026, 2025 and 2024 consisted of the following: 
Fiscal Year
(In thousands)202620252024
United States$9,124 $1,981 $16,741 
Foreign4,095 1,595 165 
Total income before income taxes$13,219 $3,576 $16,906 
Provision for (benefit from) income taxes for fiscal 2026, 2025 and 2024 were summarized as follows:
Fiscal Year
(In thousands)202620252024
Current:
Federal$65 $150 $54 
Foreign4,794 1,712 2,128 
State and local29 716 339 
4,888 2,578 2,521 
Deferred:
Federal2,421 1,143 4,613 
Foreign4,139 (1,261)(2,035)
State and local(768)(225)1,047 
5,792 (343)3,625 
Total provision for income taxes$10,680 $2,235 $6,146 
In December 2023, the FASB amended income tax disclosure guidance to require enhanced transparency in the effective tax rate reconciliation and additional disclosures related to income taxes paid. We adopted this guidance for the year ended July 3, 2026 on a prospective basis.
The provision for income taxes differed from the amount computed by applying the federal statutory rate of 21% to the Company’s income before provision for income taxes as follows:
(In thousands)2026
Tax provision at statutory rate$2,777 21 %
State and local taxes, net of U.S. federal tax benefit (1)(745)(6)%
Foreign Tax Effects:
Brazil
Return-to-provision adjustments(826)(6)%
Changes in valuation allowances687 5 %
Other12 0 %
Canada
Changes in valuation allowances3,586 27 %
Deferred true-up adjustments(2,341)(18)%
Other1,017 8 %
Japan
Deferred true-up adjustments788 6 %
Other(404)(3)%
New Zealand
Deferred true-up adjustments729 6 %
Return-to-provision adjustments531 4 %
Effects of rates different than statutory519 4 %
Other125 1 %
Singapore
Prior year true-up adjustments(2,087)(16)%
Withholding tax767 6 %
Deferred true-up adjustments1,301 10 %
Effects of rates different than statutory508 4 %
Other397 3 %
Other foreign jurisdictions1,448 11 %
Effect of cross border tax laws19 — %
Tax credits107 1 %
Changes in valuation allowances(80)(1)%
Nontaxable or nondeductible items:944 7 %
Change in uncertain tax positions1,364 10 %
Other(463)(4)%
Total provision for income taxes$10,680 81 %
(1) For fiscal 2026, the states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Florida, Indiana, Illinois, New York, Colorado.
Reconciliations of Income tax expense (benefit) computed at the U.S. federal statutory income tax rate of 21% to the recognized Income tax expense (benefit) and the U.S. statutory income tax rate to our effective tax rates prior to the adoption of ASU 2023-09 were as follows:
(In thousands)20252024
Tax provision at statutory rate$751 $3,550 
Valuation allowances(1,949)(2,354)
Permanent differences66 (20)
Foreign income inclusions63 654 
Effect of flow-through entities157 (29)
Transaction costs— 1,092 
State and local taxes, net of U.S. federal tax benefit341 877 
Foreign income taxed at rates different than the U.S. statutory rate805 411 
Executive compensation limitation343 729 
Share-based compensation
583 (339)
Tax credit - generated and expired(88)(125)
Foreign withholding taxes698 698 
Change in uncertain tax positions(77)869 
Return-to-provision/Deferred true-up adjustments599 119 
Other(57)14 
Total provision for income taxes$2,235 $6,146 
The Company’s provision for income taxes was $10.7 million for fiscal 2026, $2.2 million for fiscal 2025 and $6.1 million for fiscal 2024. The Company’s tax expense for fiscal 2026 was primarily due to profitable U.S. and foreign subsidiaries, with no offsetting benefit recorded on losses in jurisdictions for which no benefit can be realized. The Company’s tax expense for fiscal 2025 was primarily due to profitable U.S. and foreign subsidiaries, partially offset by a partial Canada valuation allowance release. The Company’s tax expense for fiscal 2024 was primarily due to profitable U.S. and foreign subsidiaries, partially offset by a partial Canada valuation allowance release.
The Company’s effective income tax rates for fiscal 2026, fiscal 2025 and fiscal 2024 were 81%, 63% and 36%, respectively. The increase in the effective income tax rate from fiscal 2025 to fiscal 2026 was primarily driven by changes in uncertain tax positions and increases in valuation allowances, offset by prior year true-up adjustments.
The following table reflects income taxes paid disaggregated by jurisdiction. No individual state exceeded 5% of total income taxes paid for any of the years presented.
2026
Federal$206 
State705 
Foreign:
Mexico1,054 
India484 
Australia371 
Indonesia275 
Other1,245 
Total foreign3,429 
Total$4,340 
The components of deferred tax assets and liabilities were as follows:
(In thousands)July 3, 2026June 27, 2025
Deferred tax assets:
Inventory$4,845 $5,004 
Accruals and reserves2,278 2,652 
Bad debts1,039 533 
Depreciation405 — 
Share-based compensation774 714 
Deferred revenue4,677 6,223 
Unrealized exchange gain/loss3,559 1,700 
Other1,155 692 
Capitalized research expenses5,256 5,543 
Tax credit carryforwards4,341 4,298 
Tax loss carryforwards92,724 95,031 
Total deferred tax assets before valuation allowance121,053 122,390 
Valuation allowance(37,022)(32,531)
Total deferred tax assets84,031 89,859 
Deferred tax liabilities:
Depreciation— 110 
Amortization
4,066 4,938 
Right of use assets245 352 
Other961 1,285 
Total deferred tax liabilities5,272 6,685 
Net deferred tax assets$78,759 $83,174 
As reported on the consolidated balance sheets
Deferred income tax assets$82,064 $88,149 
Deferred income tax liabilities3,305 4,975 
Total net deferred income tax assets
$78,759 $83,174 
The Company’s valuation allowance related to deferred income taxes, as reflected on the consolidated balance sheets, was $37.0 million as of July 3, 2026 and $32.5 million as of June 27, 2025. The change in valuation allowance for the fiscal years ended July 3, 2026, and June 27, 2025, was an increase of $4.5 million and a decrease of $2.0 million, respectively.
The increase in the valuation allowance in fiscal 2026 was primarily due to the increase of certain foreign valuation allowances relating to net operating losses being generated in fiscal 2026. In contrast, the decrease in the valuation allowance in fiscal 2025 was primarily due to the release of certain foreign valuation allowances. As of July 3, 2026, the Company maintains a valuation allowance of $0.7 million on certain U.S. federal and state deferred tax assets that the Company believes is not more likely than not to be realized in future periods.
Tax loss and credit carryforwards as of July 3, 2026, have expiration dates ranging between one year and no expiration in certain instances. The amounts of U.S. federal tax loss carryforwards as of July 3, 2026, was $219.2 million and begin to expire in fiscal 2028. The amount of U.S. federal and state tax credit carryforwards as of July 3, 2026, was $5.3 million, and certain credits begin to expire in fiscal 2027. The amount of foreign tax loss carryforwards as of July 3, 2026, was $203.9 million and certain losses begin to expire in fiscal 2027. The amount of foreign tax credit carryforwards as of July 3, 2026, was $2.5 million, and certain credits begin to expire in fiscal 2027.
The Company uses the flow-through method to account for investment tax credits generated on eligible scientific research and development expenditures. Under this method, the investment tax credits are recognized as a benefit to income tax in the year they are generated.
United States income taxes have not been provided on basis differences in foreign subsidiaries of $34.1 million as of July 3, 2026, because of the Company’s intention to reinvest these earnings indefinitely. Additionally, no foreign withholding taxes, federal or state taxes have been provided if these unremitted earnings of the Company’s foreign subsidiaries were distributed, as such amounts are considered permanently reinvested. It is not practicable to estimate the additional income taxes, including applicable foreign withholding taxes, that would be due upon the repatriation of these earnings.
The Company’s unrecognized tax benefit activity for fiscal 2026, 2025 and 2024 was as follows:
(In thousands)
Unrecognized tax benefit as of June 30, 2023$16,086 
Additions for tax positions in prior periods— 
Additions for tax positions in current periods971 
Decreases for tax positions in prior periods— 
Decreases related to expiration of the statute of limitations(102)
Decreases related to change of foreign exchange rate(880)
Unrecognized tax benefit as of June 28, 202416,075 
Additions for tax positions in prior periods95 
Additions for tax positions in current periods723 
Decreases for tax positions in prior periods— 
Decreases related to settlements with tax authorities(186)
Decrease related to expiration of the statute of limitations(819)
Increases related to change of foreign exchange rate89 
Unrecognized tax benefit as of June 27, 202515,977 
Additions for tax positions in prior periods103 
Additions for tax positions in current periods1,239 
Decreases for tax positions in prior periods(7,672)
Decreases related to settlements with tax authorities— 
Decrease related to expiration of the statute of limitations(76)
Increases related to change of foreign exchange rate76 
Unrecognized tax benefit as of July 3, 2026$9,647 
As of July 3, 2026, the Company had unrecognized tax benefits of $9.6 million for various federal, foreign, and state income tax matters, compared to $16.0 million as of June 27, 2025. The Company’s total unrecognized tax benefits that, if recognized, would affect its effective tax rate was $9.4 million as of July 3, 2026. These unrecognized tax benefits are presented on the accompanying consolidated balance sheets net of the tax effects of net operating loss carryforwards.
The Company accounts for interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. The interest accrued was $0.7 million and $0.5 million as of July 3, 2026 and June 27, 2025, respectively. An immaterial amount of penalties have been accrued as of July 3, 2026.
We file income tax returns in the U.S., Singapore, and various state and foreign jurisdictions. We are currently under examination in Singapore for fiscal years 2015 to 2021 and in various other foreign jurisdictions. We remain subject to potential U.S. federal income tax audits for fiscal year 2022 and after, and in Singapore for fiscal years after 2014. Additionally, all net operating losses and tax credits generated to date in these two jurisdictions are subject to adjustment.
On March 11, 2021, the U.S. enacted the American Rescue Plan Act of 2021 (“ARPA”) which expanded Section 162(m) of the Code to cover the next five most highly compensated employees for the taxable year, in addition to the “covered employees” effective for taxable years beginning after December 31, 2026. The Company will continue to examine the elements of the ARPA and the impact it may have on future business.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) which includes a new corporate alternative minimum tax of 15% on adjusted financial statement income of corporations with profits greater than $1.0 billion, effective for taxable years beginning after December 31, 2022, and a 1% excise tax on stock repurchases by public corporations after December 31, 2022. The IRA has not had a material impact to the Company and the Company will monitor its effect in future periods.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The Company has performed an initial assessment of the provisions contained within this legislation and does not currently anticipate any material impacts to its consolidated financial statements or related disclosures. However, the Company will continue to monitor developments and evaluate any potential impacts in future periods.