For the three months ended August 31, 2026, the Company did not record a material income tax provision or benefit. For the three months ended August 31, 2025, the Company recorded $0.6 million of income tax expense. For the three months ended August 31, 2026 and 2025, the effective tax rate was 0.0% and 21.9%, respectively. For the nine months ended August 31, 2026, the Company recorded $2.7 million of income tax benefit. For the nine months ended August 31, 2025, the Company recorded $1.7 million of income tax expense. For the nine months ended August 31, 2026 and 2025, the effective tax rate was 17.9% and 20.9%, respectively.

The Company records income taxes for interim periods by applying its estimated annual effective tax rate to year-to-date ordinary income (loss), adjusted for discrete items, in accordance with ASC 740-270, Income Taxes—Interim Reporting. Jurisdictions with ordinary losses for which no tax benefit can be recognized, including the Company's South Africa subsidiary, are excluded from the estimated annual effective tax rate. The income tax benefit for the nine months ended August 31, 2026 was recognized substantially during the three months ended May 31, 2026. The year-to-date income tax benefit computed as of August 31, 2026, based on the Company's updated full-year forecast, was substantially unchanged from the benefit recognized through May 31, 2026, primarily due to a lower estimated annual effective tax rate for the Company's U.S. and Canadian operations, which decreased from approximately 23% as of May 31, 2026 to approximately 20% as of August 31, 2026 based on the Company's updated full-year forecast. The estimated annual effective tax rate includes both federal and state income taxes; however, no current state income tax benefit was recognized for the three months ended August 31, 2026, given the Company's forecasted state taxable loss for the year. As a result, the Company did not recognize a material income tax benefit on its pre-tax loss for the three months ended August 31, 2026, resulting in an effective tax rate of 0.0%. The decrease in the Company's net deferred tax asset from $7.4 million as of May 31, 2026 to $6.9 million as of August 31, 2026 reflects a reclassification of $0.5 million between deferred tax assets and income taxes payable in connection with the Company's third quarter income tax provision, which had no effect on income tax expense.

The Company’s effective tax rate differs from the statutory federal rate of 21.0% primarily due to the effects of state income taxes net of the federal benefit, foreign tax rate differentials related to the Company’s South Africa operations, permanent non-deductible expenses, changes in the valuation allowance on deferred tax assets, discrete items related to share-based compensation, and other items.

The Company evaluates the realizability of its deferred tax assets each reporting period by assessing all available positive and negative evidence, including cumulative results in recent years, projected future taxable income, the expected reversal of existing taxable temporary differences, and available tax planning strategies. As of August 31, 2026, notwithstanding its year-to-date pre-tax loss, the Company remains in a cumulative three-year pre-tax income position in the United States and continues to conclude that it is more likely than not that its U.S. deferred tax assets will be realized, other than the deferred tax asset related to a capital loss carryforward against which a valuation allowance was previously established. During the three months ended August 31, 2026, as a result of the year-to-date pre-tax loss and the change in Massachusetts to single sales factor apportionment, the Company established a valuation allowance of $0.2 million, net of federal benefit, against the portion of its deferred tax asset for Massachusetts research and development tax credits that is not expected to be utilized before expiration. The Company continues to maintain a full valuation allowance against the deferred tax assets of its South Africa subsidiary. If the Company's U.S. operations continue to generate pre-tax losses such that the Company enters a cumulative three-year loss position, the Company may be required to establish a valuation allowance against some or all of its U.S. deferred tax assets, which could have a material adverse effect on its results of operations.