Income Taxes

6 Months Ended

Jun. 30, 2022

Income Taxes

Income Taxes

Note 9 — Income Taxes

Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income. At June 30, 2022, the Company’s U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that it is more likely than not that these future benefits will be realized. The Company will maintain this valuation allowance until there is sufficient positive evidence to support its reversal. The Company believes there is a reasonable possibility within the next twelve months that sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets with a corresponding decrease to income tax expense for the period the release is recorded. Additionally, if the valuation allowance is released and the Company continues to earn profits, the Company’s effective tax rate would likely increase in future periods compared to its current rates.

At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods.

Income before income taxes and income tax expense (benefit) for the three and six months ended June 30, 2022 and 2021 were as follows:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in thousands)
Income before income taxes	$	10,188	$	6,667	$	23,902	$	9,459
Income tax expense (benefit)	$	533	$	319	$	917	$	617

The Company’s tax expense for the three months ended June 30, 2022 was $0.5 million, compared to $0.3 million for the comparable prior period. The 2022 tax expense included an expense of $0.4 million related to the Company’s non-U.S. operations and $0.1 million related to the Company’s domestic operations. The 2021 tax expense included an expense of $0.2 million related to the Company’s non-U.S. operations and $0.1 million related to the Company’s domestic operations. For the three months ended June 30, 2022 and 2021, the Company’s U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that it is more likely than not that these future benefits will be realized. The domestic tax expense for both periods is primarily attributable to state income taxes and the tax amortization of indefinite lived intangible assets that is not available to offset U.S. deferred tax assets. The

foreign tax expense for both periods is primarily attributable to non-US operations profits and foreign withholding taxes on unremitted earnings, offset by the amortization of intangible assets.

The Company’s tax expense for the six months ended June 30, 2022 was $0.9 million, compared to $0.6 million for the comparable prior period. The 2022 tax expense included an expense of $0.7 million related to the Company’s non-U.S. operations and $0.2 million related to the Company’s domestic operations. The 2021 tax expense included an expense of $0.4 million related to the Company’s non-U.S. operations and $0.2 million related to the Company’s domestic operations. For the six months ended June 30, 2022 and 2021, the Company’s U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that it is more likely than not that these future benefits will be realized. The domestic tax expense for both periods is primarily attributable to state income taxes and the tax amortization of indefinite lived intangible assets that is not available to offset U.S. deferred tax assets. The foreign tax expense for both periods is primarily attributable to non-US operations profits and foreign withholding taxes on unremitted earnings, offset by the amortization of intangible assets.