Note 19—Income Taxes

The components of income before income taxes are as follows:

The significant components of the Company’s deferred income tax assets are as follows:

The components of the (provision for) benefit from income taxes consist of the following:

A reconciliation of the provision for income taxes to the amount computed by applying the U.S. federal statutory income tax rate of 21% to income before income taxes following the adoption of ASU 2023-09, is as follows:

A reconciliation of the provision for income taxes to the amount computed by applying U.S. federal statutory income tax rate of 21% to income before income taxes for the years presented prior to the adoption of ASU 2023-09, is as follows:

The Company's cash payments for income taxes were as follows: 

The Company’s cumulative undistributed foreign earnings are included in retained earnings in the Company’s consolidated balance sheets and consisted of approximately $281 million at  July 31, 2026. The Company has concluded that these earnings are permanently reinvested outside of the United States.

At  July 31, 2026, the Company had no U.S. federal net operating loss carryforwards. The Company has foreign net operating loss carryforwards of approximately $64 million, of which approximately $55 million does not expire, and approximately $9 million expires in two to ten years. These foreign loss carryforwards are available to offset future taxable income in the countries in which the losses were incurred.

In fiscal 2024, the Company completed a study under Section 382 of the Internal Revenue Code in connection with its March 2006 reacquisition of Net2Phone, Inc. As a result of the study, the Company recorded a tax benefit related to the adjusted amount of $23.6 million in fiscal 2024. As of July 31, 2025, all of the acquired NOLs have been utilized. 

The change in the valuation allowance is as follows:

In fiscal 2026, the Company decreased the valuation allowance by $3.3 million due to profitability in the United Kingdom as well as restructuring of foreign operations.

In fiscal 2025, the Company decreased the valuation allowance by $3.4 million due to profitability in the United Kingdom, offset by $4.7 million of additions in other jurisdictions, due to losses in countries that it couldn't utilize.

In fiscal 2024, the Company increased the valuation allowance by $3.0 million, which included the establishment of a valuation allowance of $3.5 million for deferred income tax assets that were not more likely than not going to be utilized prior to expiration, net of a decrease of $0.2 million due to the utilization or disposal of previously valued deferred income tax assets and a release of $0.3 million for profitability in the United Kingdom.

At  July 31, 2026 and 2025, the Company had no unrecognized income tax benefits. There were no changes in unrecognized income tax benefits in fiscal 2026, fiscal 2025, and fiscal 2024. At  July 31, 2026, the Company did not expect any changes in unrecognized income tax benefits during the next twelve months. The Company did not record any interest and penalties related to income taxes during fiscal 2026, fiscal 2025, and fiscal 2024. At  July 31, 2026 and 2025, there was no accrued interest included in current income taxes payable.

The Company is subject to examination by the relevant taxing authorities for the following periods: U.S. federal income tax returns for fiscal 2023 through fiscal 2026, state and local income tax returns generally for fiscal 2022 through fiscal 2026, and foreign income tax returns generally for fiscal 2022 through fiscal 2026.

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The OBBBA includes several changes to the U.S. tax code, including the restoration of 100% bonus depreciation, the immediate expensing of certain domestic research and development costs, revisions to the interest expense limitation rules, and modifications to certain international tax provisions governing GILTI and FDII. The Company evaluated the effects of the OBBBA and determined that the impact on its consolidated financial statements was not material for the fiscal years ended  July 31, 2026 and 2025.