v3.26.1
INCOME TAXES
 12 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of income from continuing operations before income taxes are as follows:
Fiscal Years
202620252024
(Dollars in thousands)
Income (loss) before income taxes
U.S. $6,801 $2,709 $91,279 
International(930)(1,173)(1,343)
$5,871 $1,536 $89,936 
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which expands income tax disclosure requirements, primarily related to the effective tax rate reconciliation and income taxes paid. We adopted the standard prospectively in fiscal year 2026. The (benefit) provision for income taxes for the fiscal year ended 2026 differs from the amount of income tax determined by applying the applicable U.S. statutory rate to income from continuing operations before income taxes, as a result of the following:
Tax Rate ReconciliationAmountPercentage
(Dollars in thousands)
U.S. federal statutory rate$1,233 21.0 %
State income taxes, net of federal income tax benefit (1)(79)(1.4)
Foreign tax effects
Canada
Changes in valuation allowance1,288 21.9 
Return to provision true-up(178)(3.0)
Other(26)(0.4)
United Kingdom6 0.1 
Tax Credits
FICA tip credit(911)(15.5)
Other tax credits(26)(0.5)
Changes in valuation allowances(3,136)(53.4)
Nontaxable or nondeductible items
Stock-based compensation529 9.0 
FICA tip credit191 3.2 
Gain on earn-out liability(210)(3.6)
Other38 0.7 
Changes in unrecognized tax benefits(175)(3.0)
Other reconciling items
Federal return to provision true-up333 5.7 
Other items51 0.9 
Effective tax rate$(1,072)(18.3)%
_______________________________________________________________________________
(1)State taxes in Illinois, Florida, Michigan, Pennsylvania, and Minnesota contributed to the majority of the tax effect in this category.
The (benefit) provision for income taxes for the years prior to the adoption of ASU 2023-09 differs from the amount of income tax determined by applying the applicable U.S. statutory rate to income from continuing operations before income taxes, as a result of the following:
20252024
U.S. statutory rate21.0 %21.0 %
State income taxes, net of federal income tax benefit(16.5)2.3 
Valuation allowance (1)(7,897.3)(21.9)
Foreign income taxes at other than U.S. rates(18.5)(0.2)
Uncertain tax positions0.7 (0.1)
Stock-based compensation24.9 0.2 
Deferred tax rate remeasurement(78.4)— 
Executive compensation limitation10.0 — 
Acquired deferred taxes(2.3)— 
Tax attribute expiration (2)428.4 — 
Other, net (3)8.7 (0.3)
Effective tax rate(7,519.3)%1.0 %
_______________________________________________________________________________
(1)The change in valuation allowance for fiscal year 2025 primarily relates to a release of a majority of the U.S. prior year valuation allowance and a release of a portion of the Canadian prior year valuation allowance.
(2)The tax attribute expiration primarily relates to the expiration of a capital loss generated in fiscal year 2020, which was not offset by subsequent capital gains and is subject to a five-year carryforward period.
(3)The 8.7% of other, net in fiscal year 2025 includes the rate impact of the federal provision to return true-up and permanent adjustments of 6.2% and 2.5%, respectively. The (0.3)% of other, net in fiscal year 2024 does not include the rate impact of any items in excess of 5% of computed tax.

Income tax (benefit) expense was comprised of the following:
Fiscal Years
202620252024
(Dollars in thousands)
Current:
U.S. Federal$37 $— $— 
U.S. State(82)252 427 
International— — (77)
Deferred (1):
U.S. Federal(1,877)(102,079)294 
U.S. State(45)(7,807)237 
International895 (5,862)(12)
Income tax (benefit) expense$(1,072)$(115,496)$869 
_______________________________________________________________________________

(1)The deferred income tax benefit in fiscal year 2025 is primarily due to the release of a prior year valuation allowance in the U.S. of $110.2 million and Canada of $6.1 million.
Income taxes paid, net of refunds, for fiscal year 2026 were as follows (Dollars in thousands):

Federal
$— 
State and local taxes
Louisiana17 
Pennsylvania96 
Texas18 
Other61 
Foreign
37 
Total income taxes paid
$229 
The components of the net deferred tax assets and liabilities are as follows:
June 30,
20262025
(Dollars in thousands)
Deferred tax assets:
Payroll and payroll related costs$4,163 $4,929 
Net operating loss carryforwards133,601 136,471 
Tax credit carryforwards38,357 37,443 
Capital loss carryforwards1,005 1,027 
Deferred franchise fees2,334 3,395 
Operating lease liabilities44,800 57,492 
Interest expense carryforward 15,572 13,289 
Other2,551 2,580 
Subtotal242,383 256,626 
Valuation allowance(57,710)(60,460)
Total deferred tax assets$184,673 $196,166 
Deferred tax liabilities:
Goodwill and intangibles$(34,507)$(34,087)
Operating lease assets(44,493)(57,149)
Other(2,271)(2,426)
Total deferred tax liabilities(81,271)(93,662)
Net deferred tax asset$103,402 $102,504 

At June 30, 2026, the Company has tax-effected federal, state, Canada, and U.K. net operating loss carryforwards of approximately $97.8 million, $26.2 million, $9.3 million, and $0.3 million, respectively. The Company's federal loss carryforward consists of $7.2 million that will expire in fiscal year 2038 and $90.6 million that has no expiration. The state loss carryforwards consist of $22.7 million that will expire from fiscal years 2027 to 2046 and $3.5 million that has no expiration. The federal and state loss carryforwards reported in the financial statements are reduced for uncertain tax positions by $17.6 million and $2.0 million, respectively. The Canada loss carryforward will expire from fiscal years 2036 to 2046. The U.K. loss carryforward has no expiration.

The Company's tax credit carryforward of $38.4 million primarily consists of Work Opportunity Tax Credits that will expire from fiscal years 2031 to 2044. In addition, the Company generated FICA Tip Tax Credits totaling $0.9 million in fiscal year 2026, which is included in this total.
The Company's capital loss carryforward will expire in fiscal year 2030.

On July 4, 2025, legislation known as the One Big Beautiful Bill Act (OBBBA) was signed into law. The OBBBA makes
changes to the United States corporate income tax system, including, among other provisions, the modification of the limitation
on business interest deductions under Section 163(j) of the Code, 100 percent bonus depreciation on qualified property and
expansion of the 45B FICA Tip Tax Credit provisions applicable to the beauty salon industry. The impacts of the OBBBA are
reflected in our results for the year ended June 30, 2026.
The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the U.S. Accordingly, we have not recorded deferred taxes related to the U.S. federal and state income taxes and foreign withholding taxes on undistributed earnings of foreign subsidiaries, which have been reinvested outside the U.S. As a result of the Tax Cuts and Jobs Act of 2017, taxes payable on the remittance of such earnings are expected to be minimal.
The Company files tax returns and pays tax primarily in the U.S., Canada, and the U.K., as well as states, cities, and provinces within these jurisdictions. With limited exceptions, due to net operating loss carryforwards, the Company's federal, state, and foreign tax returns are open to examination for all years since 2014, 2013, and 2016, respectively.
A rollforward of the unrecognized tax benefits is as follows:
Fiscal Years
20262025
(Dollars in thousands)
Balance at beginning of period$21,194 $21,232 
Additions based on tax positions related to the current year3 3 
Additions based on tax positions of prior years1 8 
Reductions on tax positions related to the expiration of the statute of limitations(179)(49)
Balance at end of period$21,019 $21,194 
If the Company were to prevail on all unrecognized tax benefits recorded, a net benefit of approximately $0.6 million would be recorded in the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. The Company recorded interest and penalties of approximately $0.1 million as reductions to the accrual, net of the respective reversal of previously accrued interest and penalties, during each of the fiscal years ended June 30, 2026, 2025, and 2024. As of June 30, 2026, the Company had accrued interest and penalties related to unrecognized tax benefits of $0.6 million. This amount is not included in the gross unrecognized tax benefits noted above.
It is reasonably possible the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next fiscal year. However, an estimate of the amount or range of the change cannot be made at this time.